As typical bank loans become more difficult to assess, bridging loans are increasingly becoming the go-to option for not just people but also businesses that are in quick need of cash.
Initially, a bridging loan was simply a temporary or short-term loan used by homeowners to get quick cash to facilitate the purchase of a new home. The loan operated by “bridging the gap” between a homebuyer’s new mortgage and the sale price of a new home in the event the homebuyer hasn’t yet raised funds by selling his or her current home. Such a bridging loan would be secured on the buyer’s current and yet unsold home, while the loaned sum is used as a down payment on the new home. But over the years and due to its increasing popularity, bridging loans have evolved into a more versatile financing option.
As of 2018, individuals and businesses alike have found other ways to make the most of bridging loans. Below, we’ll be looking at the top five ways individuals and companies will use bridging loans in 2018.
How individuals are using bridging loans in 2018:
- To avoid repossession: For homeowners who lack the financial capability to stave off a repossession, bridging loans have become a saving grace that can be accessed quickly and used to settle debts. If debts are piling up and there is no immediate cash source available, a bridging loan can be used to quickly settle a portion of the debt for the short term and thus delay a repossession.
- To buy a property at auction: If a wonderful property at a great price is suddenly made available at an auction, instead of letting the opportunity pass by, a bridging loan can be used to finance the purchase of the auctioned property. It can also be used to snatch a repossession and grab a bargain.
- Property development purchases: If you need to renovate or upgrade your property and you require quick cash, a typical bank loan might take a long time to get approved or might not even be approved at all. A bridging loan, on the other hand, can be applied for quickly and received within a few days. The loaned sum can then be used to convert your home, refurbish it, or even extend it.
- To buy time to seek a longer-term loan provider: If you need money fast for a pressing matter, you can use a bridging loan to finance yourself for the time being until you are able to get a longer-term loan provider. This move can be an expensive one, especially in light of the cost of bridging loans, but it can also be a fast and effective solution to a pressing financial need.
- For capturing an investment opportunity: Opportunities are unpredictable and can pop up at any moment, including moments when you lack the financial capability to grab the opportunity and make the best of it. But instead of letting the opportunity pass you by due to a lack of funds, you can grab a bridging loan and use it to seize the investment opportunity. This tactic can be used to change the financial fortune of anyone who is presented with an especially favourable investment opportunity.
These are just some of the ways people are currently making the best of bridging loans.
How businesses are using bridging loans in 2018
It’s not just individuals that are making the best of bridging loans, as businesses have also found ways to use the fast and easy option to their benefit.
Some of the ways companies are presently utilising bridging loans include:
- For grabbing business opportunities: In the world of business, time is of the essence, and the ability to make split-second financial decisions can make the difference between a huge profit and a great opportunity lost. Rather than being restricted in investment opportunities due to a shortage of funds, bridging loans provide an avenue for businesses to get loans fast and make financial commitments to sudden and exciting new opportunities. A bridging loan can be used to finance the buying or starting of a new venture or to acquire another business in a strategic corporate move. This is possible thanks to the fact that a bridging loan can be accessed within a few days instead of the lengthy time periods required for approval of traditional loans.
- For enlarging commercial operations: A business that’s looking to expand its operations into new locations or diversify its business can use the finances from a bridging loan to accomplish this quickly. Such a loan can also be used to purchase new equipment and serve as regular funding to accomplish new business objectives.
- For refurbishments: An office refurbishment might be long overdue, but a company is unable to carry it out due to financial constraints. A bridging loan can take away such constraints by offering some quick financing to fix up either the office area or give the retail space a facelift. A benefit of this is that the loan can be repaid when the business premises are remortgaged after the refurbishment has boosted the value of the premises.
- Refinancing owed debt: In the event there is a short-term cash flow crisis that leads to debt, a bridging loan can help pay it off or buy more time until the business can get its affairs in order. Also, refinancing can aid in consolidating existing debts into a single entity, which is much easier to manage. The loaned sum can be used to pay off lenders or settle outstanding payments to key providers and suppliers.
- For relocation: If your business is looking to move to a better location in 2018 that will expose it to greater opportunities, bridging finance can help facilitate the relocation by providing the cash you need to purchase a new business space. It’ll also make available cash for expenses such as purchasing new furniture, setting up a new IT infrastructure, removals, and much more.
So rather than restrict yourself to the arduous process of applying for a traditional loan, try out a bridging loan for faster access to needed funds as well as a less strenuous loan application process.