Often quicker and easier to arrange than traditional development finance, bridging loans are a popular choice for time-critical purchases and investments. With loans available from £50,000 to £10 million or more, a bridging loan can be used to finance a wide range of property development and construction projects. But to what extent does applying for […]
Often quicker and easier to arrange than traditional development finance, bridging loans are a popular choice for time-critical purchases and investments. With loans available from £50,000 to £10 million or more, a bridging loan can be used to finance a wide range of property development and construction projects.
But to what extent does applying for a large bridging loan differ from a more conventional bridging finance application? If you are looking to borrow a significant amount of money for a major development project, what are the potential challenges you may encounter along the way?
The Importance of Independent Broker Support
Broker support can be particularly vital when applying for a larger bridging loan. Along with helping ensure your application and paperwork are in order, your broker will negotiate on your behalf to help you secure an unbeatable deal.
For the most part, the basic mechanics of the application process are the same – irrespective of the size of the loan required. However, you can expect certain aspects of your application to be scrutinised more intensively, if you are looking to borrow a significant sum of money.
Examples of which include the following:
Security For the Loan
The maximum bridging loan value you are eligible for will be assessed primarily on the basis of the value of the security you are able to provide. Security for bridging finance is usually offered in the form of residential or commercial property, though can take the form of any acceptable assets of value. The higher the value of the security you provide, the more likely you are to qualify for a high value bridging loan at a competitive rate of interest.
Interest and Borrowing Costs
Be mindful of the fact that even a low monthly interest rate can translate to substantial overall costs, when borrowing substantial sums of money. Interest rates must be weighed up against any other fees and charges that apply, which your broker will help you build a clear understanding of. Your lender will conduct extensive checks to ensure you can comfortably afford the facility, before authorising your bridging loan.
An Appropriate Repayment Period
Bridging finance is a strictly short-term facility , with interest applied on a monthly basis. It is therefore essential to make every effort to repay a large bridging loan as promptly as possible, in order to minimise overall borrowing costs. However, to agree to a repayment date that gives you a little room for manoeuvre is inadvisable. Late payment fees and penalties may apply if you do not repay your loan on time, which in the case of a larger bridging loan can be substantial.
Exit Strategy Strength
Your lender will expect to see extensive evidence of a concrete exit strategy. The larger the bridging loan, the greater the importance of convincing the lender they will get their money back in full and on time. In addition, the viability of your exit strategy will greatly influence the competitiveness of the loan you are offered. Seek broker support at an early stage to help you put together a convincing application, and present it to the right lenders for your requirements.
About the Author:Craig Upton supports UK businesses by increasing sales growth using various marketing solutions online. Creating strategic partnerships and keen focus to detail, Craig equips websites with the right tools to rank in organic search. Craig is also the CEO of iCONQUER, a UK based SEO company and has been working in the digital marketing arena for many years. A trusted SEO consultant and trainer, Craig has worked with British brands such as UK Property Finance, Serimax, djkit and also supported UK doctors, solicitors and property developers, gain more exposure online. Craig has gained a wealth of knowledge using Google and is committed to creating new opportunities and partnerships.
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