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Finance

Reasons to Consider Bridging Loans

Bridging finances come in handy when we need quick funds for our projects. Although we mainly use them to finance properties (commercial and residential), they can also be used for other financial purposes.

Unlike mainstream loans, which take months to process, bridging loans can be approved within a few days. They help us overcome the complexities tied to conventional loans. But at what point should we consider these finances? Read on to find the answers.

 

Financing Renovations

We all know the state of properties that need refurbishment. Due to the ‘run down’ mentality, most lenders tend to shy away from financing these properties. In most cases, dilapidated properties need quick fixes that can take less than six months. Yet, normal loans have tedious pre-approval processes that last beyond six months.

 

As cash flow investors, we require quick loans for renovating our assets. Bridging loans can fill this financial gap. We can get them within three months and install bathrooms, replace roof shingles, and fix faulty faucets, among other fixes. After the light refurbishment, we can sublet and continue collecting income.

 

Purchasing Properties at an Auction

Some of us love acquiring properties listed in an auction. With a slightly improved bid, we can get a great deal on otherwise expensive property. Whenever we win a bid, most auctions require us to make a 10% down payment and avail the remaining funds within a month.

 

Very few mortgages can be processed within 30 days. On the other hand, we can get approval for a bridging loan in days. The bridging option becomes the ideal loan in such occurrences.

 

Buying a Property Before Selling the Other

As an investor, I encountered one issue when buying and selling properties in my early years. Whenever I wanted to purchase a unit, I was held up with the unsold unit. I planned to get funds in hand by selling one unit and then using them to acquire the next unit. Unfortunately, things in the property market don’t work this way.

 

Disposing of a property can be a cumbersome and time-consuming process. We can wait for months-long to sell then acquire the other property. During this time, the property we need might have appreciated. Luckily, a bridging loan can enable us to buy the new property, then pay it back whenever we sell our old property.

 

Short-term Capital

The primary reason we go for bridging loans is that they are readily available. Nowhere do we need a quick injection of cash than in businesses. Anyone doing business knows of the frequent fluctuations that affect firms.

 

We cannot rely on conventional loans to provide the needed funds. Before we are done with the paperwork, our businesses might be staring at bankruptcy. What we need is access to short-term capital. Only bridging loans can provide us with such funds.

 

Buying New Properties

Purchasing new buildings is a standard practice in the property market. Sellers often set a deposit amount and the time needed to pay the remaining cash. The timeline of completing these transactions is usually set at 14 days. If any delays in funds occur, we’re often left in a precarious position.

 

Bridging loans become important whenever we need to pay these funds within the agreed time. Without such finances, we risk losing our new property and the deposit we made.

 

Buying Commercial Properties

Commercial properties always have high demand. We can acquire them only if we act fast when they are listed. The investor who provides the needed funds first is likely to seal the deal. In such situations, we cannot rely on long-term loans. We need an easily accessible loan. A bridging loan allows us to compete for such properties by providing the finances within a short time.

 

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