Common uses for bridging loans

What exactly are bridging loans used for? Here, we find out.

One of the most commonly asked questions among those new to the concept is – what exactly are bridging loans used for?

Over recent years, the UK bridging industry has grown into one of the most important and prosperous alternative sectors seen in some time. Now valued in excess of £4 billion, more business and domestic customers than ever before are considering alternative financial products like bridging loans, over and above their increasingly inaccessible conventional counterparts.

But assuming you can comfortably qualify for a bridging loan, what exactly could you use the cash for? Paid out near-instantly and with repayment due within a matter of months, what kinds of applications best-suit the unique mechanics of bridging finance?

The answer…well, technically a bridging loan can be used for absolutely any legitimate purpose whatsoever. Nevertheless, there are some uses for bridging loans that are considerably more popular than others, which include the following examples:

  • Meeting tight financial deadlines. In any instance where a sizeable sum of cash is needed quickly and conventional banks and lenders are of little use to anyone. Given that underwriting and completion of loan transactions often takes weeks, this doesn’t help those in need of financial support within a matter of days. By contrast, bridging loans can be paid out in just 48-72 hours.
  • Chain break finance. Rather than allowing a property sale to fall through in the event that a member of the chain withdraws, a bridging loan can allow the purchase to go ahead regardless. Which can then be repaid when a new buyer is found a little further down the line.
  • Property auctions. Bagging a bargain at a property auction typically means having to foot the entire cost of the purchase within a matter of days. Once again rendering conventional loans and mortgages redundant – bridging loans enabling auction buyers to access the immediate funds they require.
  • Property refurbishments. Bridging loans are also often used as a form of development finance. More often than not, mainstream lenders won’t lend on properties that are in substandard condition and require renovation works. Bridging lenders, by contrast, consider the potential future value in such properties and make their services/products more readily available.
  • Property conversions. The cash can also be used to fund property conversions and extensions, in order to improve resale or rental values subsequently.
  • Business funding. From initial business establishment costs to unexpected shortfalls to urgent tax payment requirements, bridging loans can also serve as a real lifeline for professionals at all levels.

Comparing the market

If you’ve decided that a bridging loan represents the best course of action for you or your business, you’ll need a qualified and fully independent broker in your corner. Comparing the market manually is far too time-consuming and you’re almost guaranteed to overlook any number of potentially suitable options. Choose a broker with no brand ties, a strong track record and plenty of experience in all areas of bridging finance.

This article was provided by UK Property Finance.

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