There are several reasons for bridging finance, and we’ve come up with seven of the most pertinent. If you need a bridging loan for any of these reasons, discuss your requirements with Ascot Mortgages – the bridging finance experts.
1. To purchase property while waiting for a house to be sold
This is the most common reason for wanting a bridging loan. Many people get caught up in house buying chains. They want to purchase property, but are being held up because the buyer of their existing property is not able to complete their purchase, perhaps because they’re waiting for the sale of their own house to be finalised, and so on.
A bridging loan is a short-term option that can be used to complete a house purchase, then repaid once funds from the sales of an existing house are available.
2. Buying property at an auction
After a successful bid on property at an auction, a 10% deposit secures the property and the rest of the purchase prices is due within 28 days. The application process for a standard mortgage for the property can take more than 28 days. A bridging loan can be arranged much more quickly than this and be used to complete the purchase, then repaid once the mortgage is ready.
3. Developing uninhabitable property
If the property is purchased in a derelict or uninhabitable state, many mortgage lenders will not be able to provide a mortgage for the purchase. Bridging finance can both purchase the property and provide funds to conduct the necessary building work. Once the property is in a habitable state, a mortgage can be arranged.
4. Short-term working capital
Many businesses need short-term working capital. This is often because of a temporary decrease in cash flow due to seasonal fluctuations in their business. Bridging loans can also be used to purchase stock and equipment.
5. Paying unexpected tax bills
Sometimes, a business is faced with an unexpected tax bill that it is unable to pay within the tax deadline. A bridging loan can be used to make sure that the tax is paid and a late payment fine is avoided.
6. Buying land before planning permission
A long-term loan for building development land can be dependent on planning permission. If the developer is certain that planning permission will be granted, then a bridging loan can be used for the land purchase.
7. When refused credit
If a borrower cannot get a standard loan due to a poor credit record, then some bridging finance lenders will consider a loan application.
Whatever the reason you might need a bridging loan, security in the form of property needs to be arranged to guarantee the loan. Some lenders will consider other business assets as security.
You will need documentation to support the loan application, which varies according to why you need the loan. At Ascot, we can help you provide the correct documents.
Some lenders are specialists in one or more lending areas, but our expertise is in matching the borrower to the best lender and the best bridging finance deals. Contact Ascot Mortgages today for further bridging finance advice.
