A recent large bridging loan demonstrated that the uses for such loans are not restricted to purchasing property.
In September 2017, Huddled.co.uk reported that a Leicestershire property development company needed funds to enable it to buy out a majority shareholder who wanted to leave the business. The company had security in the form of a development of 10 luxury houses worth £1.75 million, seven of which had been presold. The local authority had also granted planning permission on three plots on the same development, and this further enhanced the security value of the development.
The management team from the property company approached a bridging finance broker who arranged a meeting with a bridging loan lender. The team was assessed as being capable, and demonstrated to the lender that it had enough working capital to complete the building of the remaining houses on the development. A bridging loan of £1.1m was agreed on to buy out the main shareholder.
A two-stage exit strategy was formulated. Two of the pre-sold houses would provide capital to reduce the loan. The sale of the houses constructed on the remaining plots would provide the funds to repay the rest of the loan.
As soon as the initial meeting had resulted in a loan offer, all the solicitors involved were instructed so that the deal could proceed quickly.
Not all bridging loans are as complex as this example, but it does show their flexibility in adapting to a range of business deals.
