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Bridging Finance

Solutions

Access short term finance – fast

There are many scenarios where you might face a short-term gap between needing to make a payment and receiving funding from another source – which could be a loan or income from selling stock or other assets.

In the lifecycle of your SME this might happen during:

  • Start-up
  • Managing running costs or creditor pressure
  • Growth such as where a large stock or asset purchase affects cashflow
  • Acquisition of another business
  • Turnaround for distressed or insolvency situations

 

Bridging finance (also known as gap funding) may be ideal as it’s often quicker and simpler to arrange than a bank loan and usually for a shorter term. Typically, funding will be from one to 18 months, so you’re not tied in for a long time.

However, interest rates can be higher than other loans, so we will always advise if other options could work for you such as invoice financing, asset finance or a commercial mortgage.

Funding needs to be secured against assets such as:

  • Property – including corporate or rental property
  • Tangible assets like plant, machinery or stock
  • Debt such as unpaid invoices you have issued customers

 

There are three main ways of repaying a bridging loan. The options will depend on what you secure the loan against and how you will repay it (e.g. with another loan or by selling stock, services or assets).

  • Monthly repayment. By servicing interest monthly you will reduce the redemption payment you need to make at the end of the loan, but obviously requires cashflow and will depend on length of the term.
  • Rolled-up. The interest and some fees are added to the loan amount. You simply clear the entire amount plus interest at the of the loan in a single payment which can be more expensive but avoids monthly cashflow pressure.
  • Hybrid. This is a middle ground option where you can roll part of the total interest into the loan and service the remainder on a monthly basis. This gives you more control over your cashflow and can be cheaper than deferring the whole amount.

 

In the aftermath of the pandemic, a bridging loan could be very useful to help you respond to rapid change and opportunities.

Bridging loans themselves are not regulated in the same way as other loans, so as a regulated adviser, we take great care to make sure you face no hidden traps or charges. We clearly explain any arrangement, valuation or admin fees.

That means you can make a quick decision and get back to running your business.

Get in touch to find out if Bridging Finance is right for your business

Get in Touch

FAQs

Q: What can I use a bridging loan for?

A: You can use the funds for whatever legal purpose you chose.

Q: How long does it take to arrange a bridging loan?

A: : We have turned around a bridging loan in 72 hours previously, but realistically we are looking at 7-10 days. Often 3rd parties can influence timings like conveyancing and valuations. From proposal to offer, we would expect to have this turned around within 24 hours.

Q: What type of security can my bridging loan be secured against?

A: Typically we look at bricks and mortar security however any asset of value can be considered as long as we can place a value on it and understand how realisable the asset is as a security.

Q: Can I use property that already has a mortgage secured on it as security for my bridging loan?

A: Absolutely as long as sufficient equity exists to support the level of borrowing. We can arrange 1st or 2nd charge loans.

Q: How much does a bridging loan cost?

A: This depends on a lot of different factors but typical monthly interest will be from between 0.75% up to 2% per month, there are also likely to be set up fees, exit fees, legal costs and valuation fees to be paid. It’s worth noting however that if sufficient equity in the security exists, a number of these fees can be rolled into the loan meaning minimal capital outlay.

Q: What if I’ve got a bad credit rating?

A: Not a problem. A number of our bridging loan lenders are geared up to deal with poor credit applications. As long as your security is solid, your credit history won’t be a problem.

Still got a question?

Let’s chat it over. We’d love to hear from you. Just give us a call or email us.

Get in touch

Case Studies

View all case studies

D&M Winchester Ltd

We recently helped D&M Winchester Ltd to secure a CBILS loan of £400k to allow them to accelerate expansion of extra warehousing space to accommodate growth.
View

Teal Engineering Services

A perfect candidate for CBILS, Teal Engineering Services had a cash requirement in order to safeguard cash flow and to help with the purchase of various machines due to a reduction in cash flow during the lockdown period.
View

PR2 Engineering

PR2 Engineering was introduced to us through Business Gateway who they had contacted for advice on ways to reduce outgoings during the pandemic.
View

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