Bridging Loans
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Bridging Loans
Updated: 29th November 2020
Bridging loans are a type of short-term property-backed finance, typically used to support a business with their need for temporary funds. The aim is to ‘bridge’ the gap between a debt falling due and the main line of credit becoming available.
The term time for a bridging loan is between 1 month and 18 months, with the loan repayable in full at the end of the term. Because this is simpler than other form of loans, they can be completed very quickly. Unlike other forms of borrowing, the monthly interest is often rolled into the loan with no repayments to make during the term of the loan.
What types of bridging loans are there?
- A closed bridge loan – where the exit strategy for the loan is clear from the outset. This means the lender knows exactly how the loan will be repaid at the end of the term.
- An open bridge loan – requires no specific exit strategy, or the strategy has no set date. Up to one year is usually allowed to repay the debt.
Advantages and disadvantages of a bridging loan
Advantages:
- Monies will be received quickly
- You can borrow a large amount of money – up to £250 million
- Flexible borrowing might apply
Disadvantages:
- The loan is secured against your property, so you risk losing ownership if repayments are not met
- The high interest rates that come with the loan – this is because you pay for the flexibility and swift payment
- You’ll be charged a number of fees, so it’s a costly option
Real Business Rescue can offer the professional guidance you need when considering a bridging loan. We are able to advise on whether this is the right type of finance for your business, and help you understand the benefits offered in more detail.
Neil Jeeves
Partner
Neil Jeeves
Partner
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