Even if you have been in business or property for a while you may have never have felt the need to use a capital injection, aka bridging loan. In the past months, bridging as a means of short term finance has become increasingly popular, as mainstream lenders continue to tighten their maximum restrictions and CBILS backed bridging has become available.
If now is the time to arrange money, and a little faster, here is a primer and graphic overview of how bridging loans work, and what they are mainly used for.
Bridging funds are normally required quickly and for a limited period of time.
You can use bridging for any legitimate funding requirement, in most cases offering a property asset as principal form of security.
Key variables
Depending on these variables, the property location and exit strategy, Loan To Value ratios move between 50% and 80%, with cost increasing as the perceived risk also increases.
Monthly interest rates currently vary between 0.4 and 1.8%.
You can either pay interest on a bridging loan throughout the term, have it retained from the gross loan amount or rolled (accrued) into the loan. If interest is to be accrued the total debt should not exceed the maximum agreed Loan To Value.
Beware that if you cannot pay interest each month (or the lender does not offer this option) the maximum GROSS loan borrowed will differ from the NET loan that you get in your hand.
CBILS bridging loans: If your busines or development has been adversely impacted by Covid-19 you may be eligible for CBILS backed bridging finance.
Bridging loans can be taken from one to 12 months. However, an increasing number of lenders will go up to two years if the security is acceptable and the client situation warrants a longer term.
How fast can a typical property bridging loan be arranged these days? At best in around 10-14 days, though the average turnaround time is now 52 days (source: MT Finance).
To discuss your requirements and explore bridging loan options please get in touch: bcacao@cc-finance.co.uk.
"If you need to raise funds for your business or property have you spoken with your bank yet?" This is the first question I ask business owners, property developers and landlords. High street banks…
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