If a business wants to raise capital fast, traditional loans may not be the best choice as they can take a long time to arrange and may come with a lot of red tape.
Bridging finance enables businesses to raise money to take advantage of time-sensitive deals. As well as property, bridging finance can be used to purchase equipment. In fact, in theory it can be used for any business purpose as long as there is a strategy for how and when the loan will be repaid.
Bridging loans are often used while longer-term funding is being sorted out. Another area where bridging loans are useful is for businesses with a poor credit history that is refused a bank or other standard loan. Some bridging lenders are prepared to provide a loan as long as there is security, usually property, to cover the loan amount.
If a business has property that is at risk of repossession because of the inability to keep up with mortgage repayments, a bridging loan can be used to provide time to resolve the situation. The main criteria is to have a plan for where the money will come from to repay the bridging loan within the loan period.
Bridging loans are flexible short-term loans that help many business as long as the business meets the loan conditions. This means having a valuable asset for loan security and a sound exit strategy for when and how the bridging loan will be repaid.