Short-Term Loans - The U.K.’s Bridging Finance Options
As its title suggests, a bridging loan “bridges financial gaps,” over a short timeline—anywhere between a mere 24 hours or three full years. Suitable for homeowners that are part of a sales chain or property investors acquiring new investment opportunities, bridging loans are instantly gratifying.
Once dominated by high-street banks, the U.K. market has become more risk-averse towards mortgage funding that offers large sums of money. Meant for high-end and luxury sales, bridging finance is not as popular as it once was—but they haven’t entirely left the market.
Types of Short-Term Financing
In 2020, private banks and peer-to-peer lenders continue to use bridging finance, a bespoke option for large-sum borrowers. High-net-worth individuals use bridging loans to secure a charge against property or other fixed assets, repaying the original sum on interest once the sale goes through. After a periodic dip, bridging finance is once again rising in popularity for its flexible nature.
Bridging finance is common among auctioneers, who may not have funds immediately available from their current property. Some clients opt to repay a bridging loan every month, agreeing on a 1% interest rate regardless of outside sales. On occasion, lenders can roll them into a yearly sum, often more convenient for specific borrowers.
Keep in mind that failing to repay your loan at the end of your specified time means forfeiting the property and potential repossession of other assets. Bridging loans don’t come cheap, so if traditional options can satisfy your needs, don’t risk bridging finance.
Why Use a Bridging Loan?
If you’re dealing with a sum above GBP5 million, a bridging loan may be the best option for you. They’re also used to purchase uninhabitable property, fund restoration or conversion works, prevent a repossession, or purchase properties under market value. However, borrowers may also favour bridging finance for the following reasons.
- It’s Fast
Even when borrowing from a private bank, the process of onboarding, approval, and regulation often takes a long time. Typically, an exchange of funds doesn’t occur until 6 or 8 weeks later. Bridging loans, however, are immediate. - It’s Private
Most bridging loan borrowers will seek the help of a specific lender or another high-net-worth individual. This option usually means more privacy and less paperwork, inevitably accelerating the application and approval process. Notwithstanding, bridging loan borrowers can expect higher interest rates and premiums as compared to traditional financing options. - It’s Flexible
Private bridging lenders don’t work with larger teams. They’re nimble, allowing borrowers to interface with decision-makers directly. As such, borrowers and lenders can agree on a tailored, more flexible plan at a quicker pace.
Conclusion
Especially amidst the current global pandemic, high-earning Brits and business owners may need to turn to bridging finance options. Provided by smaller, more adaptable lenders, bridging loans aren’t restricted by red tape. Lenders can work with clients on a case-by-case basis, fashioning loan terms towards particular financial circumstances.
With Willow Private Finance, your
bridging finance options are plentiful—whether for commercial, residential, or developmental purposes. Sources come from specialist lenders, private banks, wealthy individuals, and family offices. Whatever you need, our speed is the solution.
