Back in the early 1990’s bridging finance was a popular way of financing house purchases, of bridging the gap between purchase and sale.
From the late 1990’s onwards the residential bridging market became less popular, with lenders only looking at ‘closed’ bridging finance, in other words where contracts had already been exchanged.
In the last few years we have seen the major high street banks back away from development finance. This has seen bridging finance start to come back into favour.
What Is Bridging Finance
In effect it is exactly what is says. It serves as a bridge from one side to another. Think of it like this –
The bridging finance is used to pay for something now, pending either longer term finance or full repayment.
The growth in bridging finance has been driven by the withdrawal of high street banks from development funding and more opportunities for development becoming available.
The Catches of Bridging Finance
There are no real ‘catches’. Just be aware that bridging finance is not long term and you need an exit at the outset. Providing you know where you are going with the project and how you are going to exit it, then bridging finance is a really good way of funding things.
The cost to bridging finance is normally on a monthly basis, so we would encourage anyone to-
- Know your timescales
- Know your exit
- Budget the finance costs from the outset
- Consider your profit on the project, or the gain, then look at bridging finance costs. Not the other way round
- Speak to an expert about it first, there are plenty of options out there to compare
Associate of Bridging Professionals
Lime Consultancy are Associates of the Association of Bridging Professionals, so you can have confidence we know our stuff. If you are considering any form of bridging finance then please speak with us first.
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By David Farmer