Commercial property bridging finance has become a great tool for many investors and buyers in their quest to finally acquiring the assets they’ve long had eyes on. But like any other weapon of choice, it must be used to its full potential and accordingly otherwise it will cease to be the winning tonic it was designed to be.
To help you with that, we came up with this list of do’s and don’ts when it comes to the use of property bridging finance.
Do understand how it works. As is with any other method, you’re going to have to carefully research, read and understand how it works, what its benefits are alongside its cons and costs.
Don’t pick just about any provider. You can’t jump at the first bridging company you find. You’ll need to do research on that too. Only work with the best and to do so you’ll need to do some homework.
Do have an exit route plannedout. Property bridging finance is a short term loan and a borrowing will have to be paid out. Luckily, users get very flexible options. You may choose to pay prior to maturity or at maturity date upon the availability of your main funding source. Having your exit route planned prior will make things less likely to go haywire.
Don’t forget budgets and allocations. See to it that the amount you get out of the bridge will be used as best as can be by making a smart budget and allocation of its use. You simply cannot afford to waste a single cent.
Do understand your needs. Is property bridging finance really for you? Does it actually fit your needs and requirements in your planned asset acquisition? You’re going to have to get a firm grip of your needs so you can identify which methods are best for your case.
Don’t over or under borrow. The former will get you more burden than you bargained for while the latter will make your efforts remain futile. This brings us back to the previous tip. Know your needs well.
Do use it on the interim only. Commercial property bridging finance is a type of interim and temporary borrowing so you cannot use it for the long term. It can end up being more of a burden than a lifesaver should you opt to use them in place of your permanent financing. Use them as should be.
We’ve been told time and again that planning our finances is important and today we’ll be reiterating that. Of course, we’ll shine the spotlight on acquisition budgets and to do that we’ve asked help from Alternative Bridging to serve you with the following reasons.
First of all a budget spells a plan, a map even. It gives you a written and visual guide as to what you should do and when you have to do it. It also serves as a great reminder so that you get to avoid any detours and derailment. It helps allocate and match resources to needs thereby making acquisitions run smoother and less of a headache.
Second, it communicates the plan. In order to create one, there has to be some sort of brainstorming among the significant members of let’s say the family or the organization as in the case of businesses. The budget here can be used to communicate plans and tasks to everyone as it sets not only a monetary value but also a timeline of things and a list of needs.
Third, they help assess how much more financing is needed. We all know how real estate acquisitions go, or at least have an idea about them. They come with wicked prices. Some may be more affordable than others but then again, we could all agree that they are significantly valued. By planning things ahead of time, one can better examine and predict whether or not one’s current resources will fit the price of the property that one has set their eyes on.
Fourth, it eliminates and decreases wastage. Money is never easy to come by. It’s not every day that we win the lottery. In fact, most of us never do. This makes it a no brainer as to why we wouldn’t want any amount of wastage when it comes to these types of transactions. Plus considering the item in store, this is just no time for fun and games. With a budget, any misuse of the funds is prevented.
Lastly, it speaks of reality. Ever heard of the expectations versus reality tag? Well, the thing is we tend to have too much expectations about things even ourselves that we tend to cloud reality and make it too idealistic. With a budget, Alternative Bridging says that we get to better assess our financial capabilities and best match that with our needs to find a property that suits us.
Business and personal financing are inarguably sensitive topics and they’re pretty tough to handle. But you know what they say, sometimes you just have to face the challenge and do it we must. One of the often confused and misunderstood types of financing would have to be those that fall under the interim category. Today, we’ll discuss more about it together with Alternative Bridging to hopefully clear the cloud and make everyone more acquainted with it.
First of all, interim financing pertains to the process of obtaining short term and temporary loans to fulfill an impending transaction. It is used to cover a user’s cash needs until a permanent and bigger source of fund becomes available.
In essence, interim finance isn’t a standalone credit. It works alongside one. Still confused? Let’s take an example.
Let’s say that a father wishes to buy a new home for his growing family. In order to finance such acquisition, he decides to take a mortgage and at the same time, sell the house they are currently living in. He searches for options and finds the perfect one. The only problem is, the realtor has informed him about the period by which he must be able to make the security deposit and down payment otherwise the next buyer in line will be entertained.
Now this is his dilemma. Although he has already applied for a mortgage, the process took long and cash release isn’t going to be anytime soon. As for the sale of his current house, no buyer has shown up yet. Plus, let’s add in the fact that his pre-acquisition costs are piling up. For starters, he needs to pay the chartered surveyor who will examine the asset prior to the purchase for safety and validation purposes and also to be informed about other important details about the property. Then again, there’s the down payment and security deposit. What is he to do?
This is where interim finance steps in says Alternative Bridging. Also known as bridge loans, they will cater to the short term and immediate liquidity needs of the father. That is the pre-acquisition expenses mentioned earlier. The loan shall cover such expenses and then it is scheduled to be closed out at a maturity set to the date when the mortgage is expected to be available. This way, the father will not have to risk losing his dream home for his family just because his main fund line didn’t arrive early enough.
Financing is not easy especially in terms of buying a property. We only wish it was but alas, genies don’t really exist in real life. The thing is, choosing a method to use is very crucial. Given its importance one simply could not wing it. Sure, it’s no walk in the park but that doesn’t mean that the task is impossible. It’s doable albeit challenging. Today, we asked some advice from the experts regarding the matter and below are the tricks they dished for us.
Assess your needs. – Not all financing are the same and each one of them has been designed to cater to a specific set of needs. This makes it important to know what one needs first. This way, it will be easier to match it with the right method of choice.
Know your credit score. – This refers to a number that represents a risk a lender takes when one borrows money. It is calculated using one’s payment record, credit length, debts taken and so on. It has a huge impact on whether or not you are approved or granted a loan. Knowing where you stand will help make better direct one’s efforts.
Think about time. – Financing can come either in short or long term. The choice depends on one’s needs as well as one’s capacity to shoulder the burden. Assess which one would work best for your situation. Don’t just dive in.
Weigh down your options. – There are many choices and it’s easy to be overwhelmed. This is why one has to weigh down and scrutinize every available option first before concluding on a decision.
Assess interest structure. – Not all financing is designed similarly and this applies to its interest fees and credit structure. Make sure to carefully understand what each alternative has to offer. Some may appear drastically different while others only by a few degrees.
Consider the repayment terms. – Like interest structure, repayment terms and options for different financing methods and even providers will differ. See to it that one fully understands this to avoid any headache later on. Ask if needed and do not hesitate to demand for any clarifications.
Choose a trustworthy provider. – Lastly, the experts stress the need to look for a trustworthy provider. Choosing the right type of finance is one thing but then it is equally vital to look for someone that can provide it with quality.
Interim financing, have you heard of it or does it sound entirely alien? Regardless, we teamed up with Alternativebridging.co.uk for a more in depth view about the subject. Have you got your pen and paper at the ready? Because we surely do, time to take down some notes!
Interim financing is described as the process of obtaining a smaller temporary short term loan arranged to cover one’s cash needs until a larger long-term loan is finalized, approved or made available. In other places, interim finance is referred to as bridge, caveat and swing loans.
As its name suggests, it works to bridge or connect the gap between two points of time namely when cash is needed and the availability of permanent funding. It can be utilized by both individuals and organizations for purposes of personal or corporate transactions.
Interim financing can be pretty much used anywhere and to further illustrate its use allow us to share two examples, one from a personal point of view and the other at a business perspective.
Example #1 – A couple wishes to buy a new home for their growing family. They plan to finance it partly with savings and a mortgage. The husband takes out a mortgage and waits for the approval and cash release. The problem here is that buying a property comes with initial costs. It’s not just the purchasing price of the home. Although the couple managed to save up, it won’t suffice to cover the initial expenses such as the security deposit and down payment. To solve the problem, they take out a bridge loan.
Example #2 – A shoe manufacturer gets a huge order from a new client. The thing is it doesn’t have enough liquid cash to cover the costs of raw materials. The client is willing to provide an initial part payment however it shall be made available in a week’s time. Production has to start immediately as the machineries and labor will only be able to produce a specific number of outputs per day. To keep production from being disrupted and to meet the deadline, the shoe manufacturer takes on a swing loan to cover for the initial cost of the raw materials.
Interim Financing is nonrestrictive meaning that it can be used by borrowers in whichever way they want, allocating it to their various needs. Furthermore, it has flexible payment options allowing users to close it prior or at maturity.
When acquiring a real estate asset, financial needs will vary. In most cases, they can be categorized into short and long term needs. A popular and widely used example of the former would have to be alternative property finance.
Such method has been used by many investors to help them in their purchases and deals particularly in terms of short term requirements. As a form of interim financing, bridging loans connect the gap between immediate needs and a permanent yet to be available financing source. We all know that majority of fixed asset financing mediums take time to be made available considering the values concerned. To remove the risks, the drawbacks and the delays, the said method is utilized by many.
Now that we’re into the topic, you may be wondering what immediate and short term requirements would be provided for by bridging loans. Below is a list of some of them.
Research Costs – Finding the asset you need and would want to buy is not as easy as doing your weekly grocery. You have to consider many things and put into account a number of important factors. You’ll have to research too and with all these comes the costs of such activities.
Professional Fees – You will hire several professionals even before you get to close on the property you like such as but are not limited to the following.
Lawyer: Contracts and titles need expert knowledge. Legal requirements and papers will need a professional to handle them.
Agent: If you’re not capable of or don’t have the time to go research properties yourself, you’re likely to hire an agent or broker on your behalf.
Surveyor: Before you buy an asset, you have to get a surveyor to assess and examine it physically, financially and legally.
Security Deposit – This is a part of the selling price that buyers pay the seller to show sincerity of the purchase. This prevents the latter from selling the asset to someone else.
Property Taxes – Depending on the location, value and type of asset you are buying, you are bound to pay taxes for it upon purchase. This is something that you have to prepare for beforehand.
Down Payment – This is the initial payment that the seller requires especially if you’re not paying for the acquisition for full in cash. Without it, you won’t be able to garner the rights to a purchase.
You’ve probably heard about commercial bridging finance and got yourself scratching your head wondering what it’s all about. Worry no more because we are here to help you get to know more about it and guide you in determining whether it fits the bill for your needs. Are you ready? If you are then read on!
Commercial bridging finance is first and foremost an interim financing method. In other words, it is a funding mechanism designed to provide short term loans to fund immediate liquidity needs until permanent long term finance has been acquired and made available. This is very common in real estate acquisitions considering that they often require significant amounts of cash to fulfill the sale requirements and buyers will likely use permanent sources that need more time to process or to be made available such as but are not limited to bank loans, mortgages, proceeds from a sale and future income.
As its name suggests, commercial bridging finance is directed to the acquisition of assets intended for business use and purposes such as office space, showrooms and shops to name a few.
As mentioned earlier, it is obtained to bridge the gap between a need coming due and one’s yet to be available permanent source of funds. This makes it a stop gap measure that will help businesses in ensuring an absence of any operational delays and disruptions.
Moreover, it is used to prevent risks such as those acquired from opportunity losses. These are those costs that one absorbs after having foregone a great deal or opportunity that would add value and benefit the business.
Commercial bridging finance is also a powerful tool that enables buyers to save time. Most commercial assets tend to appreciate in value overtime especially if they are strategically located within the heart of the city, a business hub or wherever there is heavy foot traffic. Buying now will almost always cost cheaper than doing so tomorrow or in the days to come.
It is also used to save up on costs particularly that on rent. Since entrepreneurs can already acquire and move into the new asset with the help of commercial bridging finance, they no longer have to rent a space while evacuating the one they are in to make way for its sale. This is beneficial as it helps cut down costs and hasten the move without deliberately creating too much downtime and disruptions in operations.
Bridging loans are a type of short-term credit designed to bridge the gap between two transactions thus earning it the title of a stop gap measure. Companies use them to cover shortfalls that occur when a need arises but the intended mode of finance falls short of time, either unavailable or still in the process of being so.
To better illustrate, www.alternativebridging.co.uk give you an example. First we have a clothing shop that’s on its expansion phase and is planning to move from their current office to a bigger one to support the larger demand. It applies for a bank loan in order to acquire the new office that it has chosen. However, it is of no secret that such type of credit can take a considerable amount of time from application to approval. The process is really meticulous and long. Now the shop faces a risk.
What if the loan does not arrive on time and one cannot provide for the down payment within the seller’s allotted period? What if another buyer shows up with the money? Surely, it’s going to miss out on the opportunity to acquire the said asset. To avoid that altogether, a bridging loan may be used. It can provide for the upfront expenses like the down payment to lock in the deal and paid out using the bank loan as soon as the cash has been released.
Bridging loans benefit companies not only in the avoidance of opportunity loss as illustrated in the example above but also in many other ways as follows.
It requires far less requirements allowing for the entire process to become relatively fast. This is in stark contrast to traditional credit like bank loans and mortgages that take weeks or even months before cash is released. A bridge can take as fast as a few days time.
It is short term in nature. In other words the liability or burden only lasts for a short while, months for most, and would not span for years and be a familiar item on one’s financial statements. We all know that the longer a loan lasts, the more burdensome they become.
Repayment is very flexible. Companies who take out bridging loans have the liberty to pay it out even before maturity if it can and wishes to or later on once the long term and main mode of financing has already been made available.
Bridging loans are a type of interim financing that allows borrowers or users to purchase or acquire, say a property, in a timelier manner by providing them with their short term needs in cases where their main source of financing is not yet available or is deficient for the time being.
Just like any other mode of finance, bridging loans can either work for you or against you depending on several factors. Their proper use, their intended purpose and the users themselves can dictate whether or not it is the best funding option to choose. It is important that you assess things cautiously and wisely to come up with the best decisions.
The speed in which bridging finance is processed and made available is considered significantly quick in the business market. This is in stark contrast to standard loans and mortgages that may take weeks or even months. As a matter of fact, some providers can make the fund available in a matter of hours or days depending on the terms and amount involved.
Lesser paperwork is required and needed when applying for it making it a lot less troublesome and fussy to apply for.
They help eliminate opportunity losses by providing cash quickly to aid in your purchase whatever it may be in nature.
Payment is pretty flexible and you can close it down earlier than its maturity date if you so desire.
The use of the amount obtained from bridging loans is non-restrictive unlike other credit sources. You can use it in any way you want to fulfill your short-term needs.
Using a bridge for long term financing can prove to be quite expensive compared to standard loans and mortgages. This is why they are only supposed to be used for short term and interim purposes and not in the long run.
Interest rates are higher too given the higher level of risks burdened by the provider. However, bridging loans should not be shunned off as expensive if their use is only for a short period of time.
You may have already heard about bridging loans, what they are and their benefits. Still, you’re not all out clear as to their connection to your dream home. How exactly can they help make that a reality? Allow us to clue you in as you read on below.
For starters, let us define bridging loans. They are a type of interim financing that provides for short term liquidity needs such as the initial expenses required by the seller or agent of your chosen house. Take this scenario for example. We all know for a fact that residential properties have significant values. They do not come cheap. Even the smallest and simplest ones will have you shelling out some considerable amount cash. Not everyone has that much funds waiting idly in their bank accounts thus other fund sources are opted like bank loans, mortgages, sale of other assets or future income. The problem with these aforementioned sources is that they may not be made available in time. If you can’t provide for the down payment or default during your first installments then your dream home goes to the next buyer in line or gets foreclosed. Dream crushed? Oh no just not yet. This is where bridging loans step in.
This interim financing method allows you to draw your needed funds even on short notice to provide for your asset acquisition needs and in the case of the scenario above, the down payment and initial installments. This ensures that you do get to acquire and buy your dream home.
What separates bridging loans from traditional lines of credit has to be the following factors:
There is less paper worked required so buyers will not have to spend a considerably long period to prepare all the needed documents.
The funds can be made available in a matter of days. You do not have to wait out for so long just like bank loans, mortgages, proceeds from the sale of other assets or your future income.
It prevents opportunity losses at all costs. By coming up with the needed initial expenditures, your dream home will not be lost and given to another buyer.
It is fairly easy and flexible to close out bridging loans. You may pay as soon as you have the means to even before maturity or you can choose to wait for the arrival of your bank loan, mortgage, proceeds from the sale of your asset or your income and use that to pay out the bridge.