We all know that bridging finance is famous for its speed of arrangement and flexibility in use. If you take out a bridging debt to fulfill your business needs, it is known as a commercial bridging loan. It is secured against commercial property, and you must have a clear exit strategy to get the funds. Your exit strategy can consist of selling a property, using business funds or refinancing. Bridging finance activities in the UK are gaining popularity over time. Individuals are highly attracted by the straightforward application process and reduced borrowing costs. Business owners also embrace the benefits of this type of short term loans UK and use it as an alternative funding option.
Now let’s see the most common commercial uses of bridging finance.As the name suggests, bridging loans are designed to bridge all types of financial gaps. You can use this debt for almost any type of legal purpose. Though in a commercial context, you can use it in the following ways:
Sometimes it happens that you suddenly find your business is dealing with a sudden shortage of cash flow. You can use bridging loan UK to cover infrequent expenses that need quick payments. These expenses can include paying staff wages, clover tax bills or purchasing new stock. You can repay the loan amount after a specific time when your business situation gets better.
Cover Staffing Cost
Zero-hour contracts can result in sudden changes in demand and eventually increase wage costs. If your business offers client credit, your cash flow can be pinched in paying wages to staff and receiving payments from clients. A short term bridging loan can help you to pay wages, and you can repay the loan when you receive payment from clients.
Purchase Of Commercial Property
If you want to purchase a commercial property to expand your business as an investment, bridging finance can help you. It provides you quick access to funds so you can proceed quickly.
Renovation Of A Property
If you are a property developer or investor, you can take out a commercial bridging loan to renovate a property and sell it at a better rate.
Difference Between Commercial Mortgage And Bridging Loan
We are describing some differences between a mortgage and commercial bridging finance so you can decide which one is right for you.
- Bridging finance is arranged within weeks, while it can take months to complete a mortgage. Bridging loan providers mostly use automated valuation that takes less time than physical valuation.
- Mortgage loans are long term loans and can have terms of the decades, while a bridging loan is a short term dissolution that is available usually for 18 months.
- Due to its short term nature, bridging finance has a high-interest rate to cover the additional risks.
- Bridging lenders accept all types of properties, including non-standard or those which are in poor condition. On the other hand, if you have a question about how to get a mortgageyou must have a standard property to use as a security against the loan.
The application of commercial bridging finance is similar to that of residential, but you need a commercial property as collateral. If your business needs quick access to funds, it is worth considering bridging finance. However, if your business is not in a hurry to get funds, it is sensible to wait for a commercial mortgage.
Now that you know all the essential things about commercial bridging loans, you can make an informed decision whether it is right for your business or not. In conclusion, we can say that commercial bridging debt is a versatile, flexible and affordable solution that can be used in multiple time-critical scenarios.