INTRODUCTION

There is a well-known saying that opportunity knocks only once at your doorstep. Imagine a situation where you urgently need short-term finance to fund a business expense. It may be related to property, equipment purchase, or any other valid reason. Caught in a fix? The answer is…a business bridging loan. It can provide you with an immediate cash boost. So, let us understand what a bridge loan means.

MARKET RESEARCH

Bridge loans are secured through a broker. The Ernest & Young UK Bridging Market Study 2022 states that top-of-form respondents cited broker-related channels as the most important channel for loan origination. Almost 48% of respondents chose ‘independent brokers’ as the most important channel for loan originations (and 98% gave a rating of 3 or above). This is consistent with the respondents’ views in the 2019, 2020, and 2021 surveys.

WHAT IS A BUSINESS BRIDGE LOAN?

A business bridge loan is a short-term loan that helps businesses to bridge the financial gap. It is helpful till the time a person or company secures permanent finance or pays an existing obligation. You can immediately meet the current obligations by getting immediate cash flow.

HOW DOES A BRIDGE LOAN WORK?

Now, let us understand how a bridge loan works.

1. QUICK ACCESS TO FUNDS

Traditional loans might take time for approval but bridge loans are meant to be fast-tracked. This speed is crucial, especially in situations where time is money.

2. TEMPORARY FINANCE

Bridge loans are for a specific time period. This may range from a few weeks to a few years. They serve as interim financing till the time a mortgage or a traditional loan can be secured.

3. REQUIRE COLLATERAL

Bridge loans typically require collateral. This collateral provides security to the lender in case the borrower is unable to repay the loan. Also, the value of the collateral determines the amount of the bridge loan.

4. HIGH-INTEREST RATES

Since they are of a short-term nature and have quick access, bridge loans usually come with higher interest rates compared to traditional loans.

5. EXIT STRATEGY

Bridge loans often involve a balloon payment, meaning the entire loan amount is due at the end of the term. So borrowers need to have a well-planned exit strategy to repay the loan. These measures can be securing long-term finance, selling property, or creating profits through business operations.

6. VARIED USES

Bridge loans can be used for various purposes. For example, real estate transactions or funding for business operations. They are especially popular in the real estate market, allowing buyers to quickly close on a property as they await mortgage approval.

DIFFERENT TYPES OF BRIDGING LOANS

There are two types of bridging loans- closed and open. In a closed bridging loan there is a fixed repayment date. You will normally be given this kind of loan if you are waiting for your property sale to complete. With an open loan, there is no fixed repayment date, but you will normally be expected to pay it off within one or two years.

HOW BRIDGE LOANS CAN HELP SMALL BUSINESSES?

A bridge loan can be of great help to small businesses that are struggling to create a name in the market. Let’s find out how.

CAN BE QUICKLY ARRANGED

The formalities for a bridging loan can usually be completed in 5-14 days. The actual timeline will depend on the type of bridging loan you are taking and the lender you have chosen.

NO MONTHLY REPAYMENTS

Bridging loans is unique because often there are no monthly payments to make. Instead, you repay your bridging loan interest at the same time as the loan is repaid.

Also Read- Tips for Repaying Your Bridging Loan

FLEXIBLE

Bridging loans are usually underwritten manually by a person. This allows an expert to problem-solve. They also make common-sense lending decisions for you.

MAKE LIFE EASIER

Bridging can be arranged with minimal hassle. When you need to raise funds to cover an urgent financial issue quickly, then a bridging loan could be the best option.

PREVENT FINANCIAL LOSS

Bridging loans can be used to prevent financial loss in several ways. For example, if an urgent tax bill is left unpaid, it could result in adverse credit being registered against your credit file. This could lead to a higher cost of borrowing, or even an inability to borrow in the future.

Also Read- Exploring House Buying Options in The UK

FINDING A BUSINESS BRIDGE LOAN IS EASY WITH A BROKER

Business brokers, or commercial finance brokers, specialize in connecting businesses with appropriate financing solutions. This includes bridge loans. Here's how the process generally works:

A) EXPERTISE AND NETWORKING

Business brokers have extensive knowledge of the lending scenario. They also maintain a network of lenders. They understand the specific requirements of businesses. They can easily find various loan options to find the best fit.

B) ASSESSMENT OF NEEDS

A broker will assess your business needs, the purpose of the bridge loan, and your financial situation. Thus, they can tailor their search for a suitable lender.

C) ACCESS TO MULTIPLE LENDERS

Brokers have access to a wide range of lenders. This includes traditional banks and private investors. This broad network ensures that you find a lender willing to provide a bridge loan that meets your business requirements.

D) NEGOTIATION

Once the lenders are identified, the broker can negotiate terms on your behalf. This may include interest rates, repayment terms, and any other conditions associated with the bridge loan.

E) STREAMLINED APPLICATION PROCESS

Brokers are familiar with the documentation and information required by different lenders. This makes the application process hassle-free.

F) SAVING TIME AND EFFORT

Brokers can save you time and effort by leveraging their industry knowledge and connections to quickly identify potential lenders who are likely to be a good match.

G) EXPERT GUIDANCE

Brokers can explain complex terms and assist with paperwork. They ensure that you understand the implications of the loan you are considering.

HOW DO I APPLY FOR A BRIDGE LOAN WITH KINETIC FINANCE?

When applying for a Bridge Loan look for brokers with a track record of successfully connecting businesses with suitable financing solutions. Be assured, that Kinetic Finance is the best place for you.

According to the rules, there are two essential criteria you need to meet: ·      

• You will need to have a form of security or deposit for your bridging loan - usually one or more properties, or an asset that the loan can be secured against.
• You will need to have a solid exit strategy to repay the loan. This will either be through selling the property or refinancing with a traditional mortgage loan.

The other basic criteria you will need to fulfill include:

• You should be 18 years old.
• You live or have a registered address in the UK (UK ex-pats are eligible for bridge finance in the UK)

If you have any questions about your eligibility for a bridging loan, speak to one of our advisors. We will be happy to discuss your case.

CONCLUSION

A bridge loan is a financial tool that requires careful planning. It is important to understand the terms. You also need to have a clear plan for repayment before proceeding.

Bridging finance can take up to 5 days to be approved by the lender in most cases. If you want an instant bridging loan, visit the Kinetic Finance website; we offer the lowest interest rates on bridging loans in the market today. The bridging loan interest rate offered is competitive, allowing you to get your dream house affordably.