Bridging loans used to be regarded as loans of last resort that were mainly used to complete the purchase of a new house while waiting for an existing house to be sold. It is true that many bridging loans are still used for this purpose, but there are now many other uses for them besides this.
Competition is fierce amongst bridging lenders and this has prompted many improvements to the bridging loan process. Borrowers do not choose a bridging loan product just because it is offered at the lowest interest rate – they are also looking for better customer service and other features.
A major advantage of a bridging loans their speed. A loan application can be approved in less than a day. In order to stand out, some lenders are able to provide loan decisions within three minutes.
After the application has been approved, documentation has to be submitted and checked and, if the loan is for property, a valuation report needs to be made. For a conventional mortgage, the time between approving the application and the funds being available can be weeks, but bridging loans are much quicker. Some lenders provide a guaranteed time frame. One lender promises that the time taken between the application, approving the documentation and releasing the funds will be no more than five days.
Like most business areas, bridging finance is embracing technology. Finance brokers can use lenders websites to find quick loan approvals for borrowers. Smartphone apps are available to make the information gathering process easier for borrowers by incorporating property cost calculators for property developers, as well as loan-to-value calculators.
Not just breaking chains
Though bridging loans are useful for breaking house buying chains, there are other property-related reasons for needing a loan. Property renovations and conversions can be financed through bridging loans.
The completion of the purchase of property bought at auction is normally required within 28 days. A bridging loan can be used for this, then repaid once a long-term mortgage has been arranged.
Not just property
Bridging loans are no longer just for property deals. Businesses can use a bridging loan to alleviate short-term cash flow problems. This is particularly useful for businesses that have seasonal low turnover periods, since a bridging loan provides the finance to pay the expenses until business pocks up.
A business may be owed a lot of money on outstanding invoices but be short of working capital. In such cases, bridging loans can provide funds until the invoices are paid.
An entrepreneur may come across an opportunity that is time sensitive; for example, stock may be temporarily offered at a considerable discount for bulk orders. A bridging loan can provide the finance to buy the stock, with the loan repaid from the sale of the goods.
A Bridging loan is a flexible finance option that is now easier to apply for and can be used for a wide number of purposes. For your bridging finance needs, talk to Ascot Mortgages, who can find you the best deals.