How can investors use a term loan offered by a specialist finance lender to provide funding over long periods than traditional bridging? 

Introducing The Alternative Term Loan

There’s no argument that bridging finance can be an extremely useful tool for those needing business funding. Borrowers can use it to unlock working capital, while businesses facing issues with cash flow or those that require a fast injection of capital can equally find bridging the ideal solution. 

SME business owners like bridging finance because it’s quick and easy. The application process is far less onerous than with other forms of finance and funds can be made available much more readily. 

What if a Bridging Loan isn’t a suitable option?

That said, there are times when a bridging loan isn’t the most suitable option for businesses or property investors. Perhaps the SME owner will be better off with a longer-term loan, delivered on a commercial basis, in order to spread the cost of a large purchase over time. Alternatively, a developer may need funding for longer-term projects to gain more time to complete their property project.  

Such ‘term’ loans are usually available for longer than 24 months with a bridging loan, with three to five years the most common range. The benefits of a term loan are that it provides the borrower with more time, giving them the flexibility they need to complete an ongoing or complex project, as well as helping preserve liquidity. 

Alternative Term Loan

Our Alternative Term Loan, for example, can be secured on a first charge basis over residential investments, office buildings, retail premises or industrial and distribution properties. And it can be used for purchase (including at auction and for private treaty purchase), refinance, property improvement or working capital for commercial and residential properties.  

We find that business start-ups are particularly attracted by the flexibility of a term loan, as well as those involved in asset management, where a client may have a portfolio of assets they want to build upon. Indeed, if there is an uplift in income or improvements are made to the assets which result in an increase in value of the portfolio, then additional advances are possible.  

Brokers and clients who have typically dealt primarily with bridging loans should bear in mind that with a term loan application, the lender will need to be satisfied that the borrower can pay the monthly interest. This is a big consideration when establishing what type of finance will be most suitable for the client. The final capital balance is typically settled at redemption of the loan, through the sale or refinance of a property or other assets. 

A term loan can provide secure funding for the property industry and business community and in certain circumstances offer a more appropriate solution than a bridging loan. At Alternative Bridging, we offer both bridging finance and term loans in order to provide choice for the business owner who can establish which product best suits their needs.