Bridging Finance is more than just a Bridging Loan

How would you use bridging finance for your clients? Perhaps as a short-term fix to complete an urgent purchase, or finance for a housing development?

It could be used as an alternative to an overdraft, or to finance a home renovation or refurbishment? It could even be used as a term loan.   And, of course it could be residential or commercial, regulated or not – a first or a second charge loan.    There are a variety of answers and each offers a different opportunity.

Bridging Finance is a multi-faceted product

It is a multi-faceted product and, in fact, “bridging finance” is now a euphemism for an alternative source of property finance for owner-occupiers, the property industry and the business community. It is a diverse source of finance for an equally varied group of borrowers.

Bridging finance has applications for financing property purchases, funding residential development, providing working capital and repaying expired loans. It can also be used for improving existing assets and auction purchases.

For introducers, these different funding choices, that are sometimes all available under one roof, present great opportunity to meet the diverse needs of their clients.   On the ball lenders and savvy brokers recognise that sometimes bridging can present an alternative solution which could turn a “no” to turn into a “yes”.

For example, when the income on a property has not been stabilised and an exit by refinance is a year or two away, then a term loan for 3-5 years is the answer.   This is not something readily associated with bridging, but it can prove an invaluable option.   Similarly, a lender with a listening ear that provides decisions by people, not algorithms, can provide businesses which are on a recovery path with a term loan.  This also provides the time needed to implement their plan to re-establish profitability.

Where a property needs improvement before being refinanced in the mainstream, a refurbishment bridging loan can be the answer.   Equally, acquiring and refurbishing a buy to let property with a refurbishment bridge, enables value to be added.  And the repatriation of capital for another project when the property is refinanced.

Experienced Lenders

Development finance is the odd ball in the “bridging” family of products.   Its success depends on in-depth investigation as there are many moving parts, making it more complex.  Complexities such as land value, construction cost, sales value and separately, sales demand. Because of this, more questions will be asked and the closing period extended. This is just a fact of life. But remember, the more experienced the bridging lender, the shorter period and the more certain the outcome.

Lenders with the ability to offer the choice of all these products provide their introducers with a world of opportunity. Not only at outset, providing an alternative solution when the facts prove not be what is expected, but also during the life of the loan and on expiry. How helpful it is when a lender can extend a bridging loan or transfer to a term loan or even fund unexpected repair costs, and all under one roof.

So, introducers, please listen here!   Bridging finance is not a just bridging loan, it’s more than just a bridging loan but an alternative source of finance.  It provides an invaluable tool for you and your clients.  Learn what your lenders have to offer, work closely with them, and turn every opportunity into a loan.