What is bridging finance?

There are so many terms floating around in the world of finance that it’s easy, even for a seasoned business owner, to get a little confused about which is which.

One such term, ‘bridging finance’ is a seriously popular one with businesses looking to grow.

Why?

Because bridging finance offers an unparalleled level of flexibility, efficiency and consistency.

So, whether you’re a real estate investor, a business owner, or simply curious about finance, understanding what bridging finance is, and how you can use it to your advantage, is essential.

In this blog we’ll delve into the world of bridging finance, exploring what it is, its purpose and its benefits. 

What is bridge financing?

Bridge financing, also known as bridging finance and bridging loans, is a short-term financing option used by businesses to bridge the gap between the need for immediate capital (often for an investment in property) and the availability of long-term financing solutions.

Generally speaking, long-term financing solutions for significant business purchases can, understandably, take a very long time to negotiate (there’s a lot of money at stake, after all!).

Bridging finance provides businesses with immediate access to the capital they need to grow. 

How does bridging finance work?

Bridging finance works in much the same way as other finance options, with the difference being that the process is often significantly faster.

Here’s how it works:

• Application – Applying for a bridging loan couldn’t be easier, but there are a few key details you’ll need to provide, including the amount needed, details about your business and your proposed repayment plan. A lender will also do a credit check and will value any collateral you offer. 
• Loan approval – Once your loan is approved, the lender will provide you with an offer letter that outlines the terms and conditions of the loan. This includes the loan amount, interest rate, repayment period, fees, and any specific requirements, such as collateral or guarantees.
• Valuation & security – In many cases, bridging finance requires you to provide security or collateral in order to secure the loan. This is often property, land or other valuable assets.
• Funds disbursed  - Once signed off and your security is verified, you’ll receive your funds. This is often done incredibly quickly, within days or weeks.
• Repayment – Typically, bridging loans have a short repayment period, ranging anywhere from a few weeks to 36 months. 
• Exit strategy – You’ll be expected to have a clear exit strategy in place, which outlines how you will repay your bridging loan. This might be in the form of selling the property, securing long-term financing, or generating funds through other means. This step is essential, as bridging loans aren’t designed to last for a long time.

What are the benefits of bridging finance?

Bridging finance is an incredibly important type of finance, and it is growing in popularity year on year.

It is unique, and has some relatively niche use cases. Business owners are opting to use bridging finance because: 

• It delivers super speedy funding
• It offers highly flexible repayment options
• It allows you to bridge financial gaps
• It let you seize time-sensitive opportunities
• It opens doors to profit-generating activities
• It helps you temporarily manage cash flow challenges

While bridging loans generally come with slightly higher interest rates, this is usually mitigated by the short period of the loan.

Despite this, we always recommend talking to bridging loan specialists before you decide to take out a loan. This both ensures you get the best possible deal, while also guaranteeing your loan is in your best interests.

What businesses use bridging finance?

Bridging finance is used by people and businesses across the world, from SMEs to real estate investors, bridging loans are a great way to access the cash you need quickly. 

In our time brokering high-quality bridging loans, we’ve seen many uses of bridging loans, including:

Property development

Development bridging loans are a great way for developers to quickly move on to their next project without getting bogged down in the sale of their previous project.

A bridging loan gives you the up-front investment you need to bridge the gap while you sell, meaning you’re far more profitable and efficient in the long term. 

Real estate investors

Bridging finance is popular among real estate investors who engage in property flipping or investment projects. It enables them to purchase properties quickly, renovate or enhance their value, and then sell them for a profit.

SMEs

SMEs often turn to bridging finance to address short-term cash flow challenges or to fund growth opportunities. It can be used to cover operating expenses, purchase inventory, invest in marketing campaigns, or seize time-sensitive business opportunities.

Bridging finance provides SMEs with quick access to capital, enabling them to manage temporary financial gaps and sustain business operations.

Retail/hospitality businesses

Businesses in the retail and hospitality sectors may use bridging finance to support their operations during seasonal fluctuations or while waiting for a longer-term financing option. 

For example, a hotel or restaurant might require immediate funds to renovate or expand their premises, purchase equipment, or meet increased demand during peak seasons.

Professional services

Professionals such as doctors, lawyers, and accountants who are setting up or expanding their practices may utilise bridging finance to cover the costs of establishing a new office, acquiring equipment, or hiring additional staff. 

Bridging finance can provide them with the necessary capital to get their practice up and running before transitioning to a more permanent financing solution.

Secure your bridging finance today

Rapid, efficient, reliable. 

Rapid Bridging specialise in getting you the money you need in your pocket as quickly as possible. 

We’ve been doing this for over thirty years; we have ongoing relationships with leading lenders, and have streamlined our process to ensure there’s as little stress on you as possible. 

Whether you’re after advice on bridging finance, or you’re ready to get started, don’t hesitate to get in touch with our team of specialists today.