Bridge Financing 101

In the fast-paced property market, sometimes you may need immediate funding; read our bridge financing 101 for an insight into how bridge financing can come to the rescue.  So what exactly is bridge financing?

Bridge financing, also known as bridge loans or bridge funding, is a short-term loan provided to cover immediate financial needs until a more permanent or long-term financing option becomes available.

As a temporary financial solution, it enables individuals or businesses to access funds quickly to meet pressing financial requirements, for example when acquiring a new development site before achieving planning consent.

Bridge loans are typically secured against collateral, such as real estate or inventory, to provide lenders with assurance and mitigate the risk associated with the loan.  The duration of bridge financing usually ranges from 3 to 12 months, but extended terms are also possible.

Developer Money Market looked for an alternative option for property developers to find their funding in a an easy, quick way where they can compare property development finance online

Bridge Financing 101 – The Advantages

Speed and Accessibility: Unlike traditional lending options, which may involve lengthy approval processes and extensive documentation. The speed of a bridging loans can vary from lender to lender.  A standard bridge may take 6-8 weeks to complete. Faster options are also available resulting in completion in 10 to 24 days.  This swift access to funds enables borrowers to seize time-sensitive opportunities or address urgent financial needs without delay.

Flexibility: Bridge financing offers the most flexibility, where borrowers have the freedom to use the funds for more difficult transactions.  Additionally, bridge loans often come with customisable repayment options, allowing borrowers to structure the repayment schedule according to their cash flow and financial circumstances.

Maximising Opportunities: The speed of bridge financing means that borrowers can capitalise on lucrative and often time-sensitive opportunities that may come up.  Whether it’s quickly acquiring undervalued properties or investing in time-sensitive projects, bridge loans empower borrowers to act swiftly and capitalise on favourable opportunities.

Credit Enhancement: In some cases, bridge financing can help improve the credit of borrowers by providing them with the necessary liquidity to fulfil their financial obligations promptly.  By demonstrating the ability to meet short-term financial commitments, borrowers may enhance their credit profile and strengthen their credibility with lenders, paving the way for future financing opportunities.

Developer Money Market’s Key Products

Here at Developer Money Market, we work with clients to help them find bridging options according to their business needs and connect them with lenders that are the right fit.

There are many bridge options available with rates of approx. 0.95% – 1.05% per month and leverage of 75% LTV but below are some more unusual options:

For some, a ‘stepped rate’ could offer a very low fixed rate at around 0.65% (with 75% LTV) for an initial period (usually five months) with then the rate increasing significantly later in the term. If you are sure of exiting your bridge early, then this could work very well.

Bridge terms from around 0.83%pcm could be a good, fixed term for borrowers where the balance of a good rate, together with a longer fixed term, and with lower LTV of under 70%.

Where you may require more cash day one there is a very small selection of bridging options with slightly higher levels of around 80% LTV (available on case by case), but the rates are usually a little higher to reflect the extra leverage.

Ultimately, of course, rates and bridge terms will be subject to the usual lender criteria including the status of planning consent, size of facility, borrower experience / credit status and exit strategy, etc.  Be aware too of how lenders value the property, is it full market value, 180-day value, etc. which can impact the amount of funds released.

Developer Money Market are here to guide you through all of these options.  Whatever your bridge loan requirements, we will search the market to provide a range of options for every client.  Please call us on 0207 096 2003, or contact us here, and we’ll be pleased to help.

You can also find out more about us and our services via our YouTube Channel here.

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