If your business is seeing rapid growth and you’re considering new premises a bridging loan might be for you in financing your new property. The very nature of a mortgage means that it can be a very slow process, whist bridging loans are characterised by a much speedier process. Not to be considered as a long term financing solution, they are usually set at a higher interest rate. But what are the other benefits of a bridging loan to a business compared to a mortgage.
Buy Property Fast
As noted above, applications for a bridging loan are usually much shorter due to their nature of being a short term financing solution, bridging the gap until a longer term financing solution comes into place. The introduction of the Mortgage Market Review (MMR) rules in April 2014 means that the application process for a mortgage is a lot more rigorous.
Of course, great property’s come and go very quickly which means sometimes you need to act fast. When you’re buying from a property auction for example, a bridging loan might be a viable solution for you.
Break Up the Buying Chain
The normal process of a mortgage is that you sell your current property before you can purchase a new one. You are relying on someone to purchase your property so that you can move on and so forth. Sales falling through can mean delays in the buying process. A bridging loan might be a suitable solution in this circumstance where you could purchase before someone has purchased your property.
Things to consider
A bridging loan can be used in a different manner, to pay off a current mortgage. Though useful times, they come with a higher interest rate and therefore need to be an affordable short term solution for your business. If you are still unsure about what might be the right decision for you and your business, it may be worthwhile if you speak to a financial advisor who can understand your circumstances.