Busting bridging loan myths

Busting bridging loan myths




If sourced from a responsible lender, bridging loans can provide a much needed injection of capital, says Gary Bailey, Sales Director of Lancashire Mortgage Corporation .

 If sourced from a responsible lender, bridging loans can provide a much needed injection of capital, says Gary Bailey, Sales Director of Lancashire Mortgage Corporation.


With the UK economy now on solid ground, businesses are more eager to grow than they have been in over half a decade. The array of financial tools available to these growth-hungry businesses is significant; asset finance, overdrafts, business loans, factoring, investment, venture capital, corporate finance and public offerings – and that’s just the start.  

Other serious considerations are the specialist secured lending market where there are tools like bridging finance, auction finance and other short-term lending, which are taking the lending market by storm. 

Understanding even the most common of financial tools can be complicated. However, savvy brokers over the past couple of years have recognised that bridging finance is ‘more than it says on the tin’ and is an exceptional short term funding vehicle that can be an ideal solution in many circumstances. 

Experienced and well established lenders have allowed the traditional bridging loan product to evolve from its dated perception and have now become one of the most dynamic products in the finance market. When used correctly, bridging finance can in fact be a very viable short term solution for a number of financial requirements. 

Opening doors 

These days, almost instantaneous access to substantial amounts of money is seen by the ablest and most agile managers and business people as a brilliant facility that opens up the door to otherwise unavailable opportunities. They can provide funds for a business acquisition, to purchase much-needed stock, or jump to the front of the queue to acquire a valuable addition to a property portfolio, perhaps. In circumstances where important assets are being auctioned off, short-term borrowings can make the difference between a successful bid and failure. 

Bridging finance gives quick-thinkers the ability to act fast. 

Rapidly-growing businesses often need finance to take the fullest advantage the current wave of consumer optimism and economic recovery at a time when the banks are still being cautious and dilatory. 

Using bridging finance effectively and safely  

As mentioned previously, if used correctly, a bridging loan can be an ideal solution for brokers and intermediaries to present to their clients. However, you should consider the following before providing advice when looking at a bridging loan: 

1. Ensure you use a reputable lender - it’s easy to just go for what looks like the best deal on the surface, but the difference between any two lenders can be significant. A good lender will assess the individual circumstances around each applicant profile, rather than using a blanket approach. 
2. Consider your exit strategy – all good lenders will assess the client’s exit strategy before they even consider offering the loan. If you’re selecting a lender who seems to care little about how you will manage to repay the loan, you might want to think about choosing an alternative one!  
3. Make sure the time scale is suitable - remember bridging loans tend to run for no longer than a year or two, so if finance is required for a longer period of time, you might want to select an alternative option. Due to the relatively short time period of a bridging loan, they tend to come with fewer changes to terms and conditions. 

Enabling growth 

It’s positive to see that some of the misconceptions around bridging finance are being dispelled and that the bridging option is now being considered more than ever. This in turn is creating unrivalled opportunities for intermediaries, brokers and their customers. 

The ‘short-term expedient’ is often a first choice. It’s right up there with the best financial tools when strategic funding is on the agenda, if it is being used for the correct purpose, of course. 

It’s great to see more and more brokers are now recognising when these short term funding vehicles are an ideal funding solution for their clients’ circumstances, and often deliver more value than expected. The alternative lending industry is making massive strides in filling the huge gap in capital availability caused by the banking crisis. 
 

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