Today’s businesses have access to a dynamic range of funding solutions for all purposes. Secured loans, small business loans, development finance, crowd funding?” a list that’s growing and diversifying all the time.
But there’s one entry to the list that’s been attracting record levels of interest as of late. Where short-term expenses must be met as quickly as possible, bridging loans are proving a popular alternative to more traditional secured loans.
But what is it about the bridging loan that holds such appeal” More importantly, in what way does a bridging finance provide a preferable alternative to more conventional funding solutions?
What is a business bridging loan?
Simply put, a business bridging loan is a short-term financing option, usually used to cover a company’s finances until something more long term can be arranged, and is typically secured against a residential or commercial building.
How long does a bridging loan take to arrange
If you’ve got something to secure it against, it can be done within a few days. Bridging finance companies have their own lending criteria, but can typically arrange a business bridging loan quicker than a high street bank.
7 benefits of business bridging loans
1. Fast and fuss-free access?
Perhaps the most important characteristic of a bridging loan is the speed at which the funds can be accessed. Whether applying for £50,000 or £5 million, it’s perfectly possible for the money to be made available within three to five working days. Precisely why bridging loans have become a popular choice in time-critical situations.
2. Affordable interest rates
Borrowing costs vary significantly from one lender to the next, but these ultra-short-term loans typically attach highly competitive borrowing costs. Interest rates of less than 0.5% per month are the norm, which over a repayment period of say six months amounts to just 3% total interest payable. Many business borrowers are finding bridging finance significantly more affordable than longer-term loans and funding solutions.
3. Greater flexibility
A bridging loan can be used to fund any legal purchase or cover any urgent cost whatsoever. There’s very little scrutiny regarding the borrower’s intentions for the loan – it’s simply a case of providing the necessary collateral. Bridging finance can be uniquely flexible and accessible, with loans typically being issued exclusively on the basis of the value of the applicant’s assets.
4. Simplified application processes
Applying for a bridging loan has also been simplified significantly over the past couple of years. Assess affordability using a bridging loan?calculator, contact a specialist broker and compare the best deals from a panel of specialist lenders. Again, the whole process can be completed and the funds accessed within as little as three working days.
5. Poor-credit applicants can qualify
Bridging loans are one of few financial products that typically do not take credit scores into account. Once again, eligibility is usually established on the basis of collateral – not the applicant’s credit history. Where applicants with poor credit are excluded from more conventional loans and funding solutions, bridging loans may still be accessible and comparatively affordable.
6. Early repayment options?
Contractual terms vary between competing lenders, but it’s not uncommon for bridging loan agreements to include amicable early repayment clauses. Whereas early repayment of a longer-term loan is usually penalised, early bridging loan repayment is often encouraged. Doing so has the potential to significantly reduce overall borrowing costs. If you find yourself in a position where you’re able to repay the loan earlier than agreed, it could work in your favour to do so.
7. Investment opportunities
Last up, it’s not uncommon to occasionally find yourself staring at an unmissable business opportunity you simply cannot afford to capitalise on. Raising the required funds via traditional channels isn’t an option because, by the time you’ve acquired the capital you need, the opportunity will have passed. One example is the sale of a bargain asset at auction, or a lucrative investment opportunity of any kind.
In all such instances, a bridging loan could be issued within a matter of days. All with no conditions imposed by the lender as to where, when or how the money can be used.