Bridge loans are popular all across the UK among investors considering their speedy funding. However, you should know more about these loans to get the maximum out of your loan offer.
Many loan-providing companies offer these loans. Especially, the online lending platforms are considered a good choice if you need a bridging loan for commercial property. As an investor, you can always find these loans as a last-minute saviour.
What are bridge loans in commercial real estate?
Bridge loans, also known as bridging loans, are short-term loans with a duration of 6 months to 36 months.
The primary purpose of these loans is to provide funds to fill a financial gap while the investor arranges a larger amount.
Bridging loans are more flexible as they are not approved solely on your financial history. In fact, the value of a property is also a decisive factor.
Common purposes or uses of loans are –
- Borrow instant funds until you get a bigger loan approved
- Refinance existing debt effortlessly
- Cover financial gaps between two transactions
- Attain speedy funds for time-sensitive investment opportunities.
Advantages give you confidence to borrow
Yes, exactly. If you know about the benefits the loans offer, it becomes easier to make your borrowing decision. Here are the benefits you should know about.
Here are the major benefits of bridge loans that comfort your finances for the short as well as long term.
- Funding speed
Speedy process provides comfort to investors. Especially if taken from an online platform, it brings more flexibility. Hence, if you are planning to invest in real estate, fast funding will help you grab investment opportunities at the right time.
Why speed matters for investors?
- Enables quick property acquisitions
- Prevents loss of opportunity due to scarcity of funds
- Helps secure investment deals in the industry
- Flexible criteria
The primary reason behind convenient funding through bridging loans is their flexible eligibility criterion. You can easily qualify to apply for the funds and can get approved due to simple affordability rules.
Factors that make loans flexible
- Less focus on credit score
- Consideration of future property value. No dependence on financial history only.
- Lenders consider applicants with irregular income.
How investors can use it?
- No constraint on employment status. Self-employed individuals can apply too.
- Those with short-term cash flow issues can use these loans.
- Enable competitive bidding
Property sellers prefer only those investors who can pay on time and can close the deal right away. Hence, this is where a bridging loan can provide instant support.
How does it help?
- Offers timely funds to exploit purchase offers
- Getting funds on time reduces financial complications
- Improves negotiation ability to get a deal on your terms and conditions.
- Ideal for transitional properties
Several properties are not suitable for traditional financing due to eligibility issues. Hence, bridging loans are here as a pragmatic solution.
The property types are –
- Under renovation
- Vacant or partially leased properties
- Properties with short-term cash flow issues
Example –
- A commercial building that is occupied by only 50%.
- A multifamily complex that needs upgrades
- A retail property under the repositioning process
- Helps fulfil short-term commitments
Yes, this is what these loans are designed for. You can obtain funds instantly for an opportunity. It has another benefit. As an investor, you are not committed to a long-term loan obligation, as these are short-term loans.
How does it help?
- No need to pay a higher cost due to the interest rate in a long-term loan.
- Adaptable to market change as per the requirement.
- Freedom to sell, restructure, and refinance in a short time.
- Higher loan-to-value ratio
You can borrow a larger amount as the loans easily approve a major part of the property price as a loan.
Relevant common features
- LTV is decided as per the current property value.
- Ability to encash the equity of the property.
- Funds for acquisition as well as renovation.
This allows investors to-
- Invest in diversified projects
- Borrow with less or no upfront cost
- Maximise returns on property
- Interest-only payment options
Many lenders offer an interest-only payment option, which considerably reduces the burden of monthly instalments. This ensures smooth cash flow, leaving the business operations unaffected.
This payment option is helpful –
- For under-renovation properties
- Capital can be reinvested for bigger profits
- Lower instalments help maintain liquidity
Benefits for investors –
- Can plan fast for future investment options.
- Money saved due to low instalments can be used for business expenses.
- Smooth business operations are assured with timely funds.
- Helps avoid financial gaps while gaining opportunities
Good times do not wait for long. If you have a great deal, it is always in a ‘take it or leave it’ mode. The bridging loans ensure you get the money on time without any loss of investment chance.
The loan can help –
- Prevents loss of investment chance.
- Provide liquidity for business stability
- Smooth cash flow for daily business operations.
- Timely investment opportunities can be exploited.
- Customised loan offers
Customisation is a significant feature of these loans. Hence, you can get funds approved as per your repayment ability. This makes repayment hassle-free and affordable.
Customisation benefits –
- LTV as per the current value of the property
- Flexible repayment plans
- Cross-collateralization
- Extension options
- Draw schedules for renovations.
- Useful for market transition
As per changing market conditions, these loans can provide funds for new opportunities. In such a case, long-term loans can be difficult to approve. Hence, in the form of bridging loans, short-term financing is a better option.
The loans allow investors to
- Stabilize assets
- Turn complicated situations into favourable conditions.
- Avoid looking for long-term high-interest loans.
Strategic uses of bridge loans
A bridge loan is a smart borrowing option, hence they provide strategic way for you to invest.
- Portfolio refinancing
- Fix and flip commercial projects
- Lease-up strategies
- Pre-development financing
- Easy asset acquisition
- Property renovation possible
Conclusion
Bridging loans are popular because of their primary benefit of fulfilling a financial gap. Considering the volatile nature of real estate, it is vital to have some dependable loan options.
If you are an investor and looking for the best business loan without a guarantor in the UK, a bridging loan is the best option. You just need to find the right lender. Direct lending is usually the best choice considering its speedy loan process. Hence, think less, act more if you have to deal with a financial gap. Borrow today and grab the commercial opportunities.
