If you are starting up a business, or you have decided that it is a good time to move from your current rented office space to somewhere that you own, it can be hard to figure out the best way to get quick access to the capital you need. If you have found the right space and are ready to buy, but have financial hurdles preventing you from having access to the funds, then a bridging loan could be the right solution for you.
What Are Bridging Loans?
When it comes to property, bridging loans are short term loans that can grant you access to the money you need to make a quick purchase. They are not long term loans like mortgages; they are designed to be paid off within a timeframe of a few months to a couple of years, giving you time to address any cashflow issues or arrange a longer-term money solution like a mortgage. Bridging loans are secured by placing a first charge on the property, which means that in the event that the funds are not repaid, the lender has the right to force the sale of the property to recoup their money, much like with other forms of property finance such as mortgages.
How Much Can You Borrow?
The value of the bridging loan tends to range from low hundreds of thousands right up to tens of millions, as one would expect for loans focused on property. Finding out how much you need to borrow will be a case of figuring out how much the office space you need costs – though this is naturally easier if you already have identified a property. If you have not and are still in the planning stages, then getting an idea of the price range of the size and location of office space you need will help, as will factoring in your budget and your plan for ultimately paying for the property.
Can I Take Out Bridging Loans as a Business?
Bridging loans can be taken out by both individuals (who can use them for residential properties) and by businesses. If you are already registered as a UK company, you will be eligible to apply for this kind of finance as your business entity rather than as yourself. If you are planning a new business start-up and have not registered a company yet, it is best to have all of this in place before you start seeking out property finance that you expect to use solely for business properties.
Talk to lenders and find out what kinds of terms and interest rates you can expect for bridging loans of the value that you need. In general, when everything is in place, a bridging loan can be arranged quickly and funding can be supplied fast, allowing you to get the ball rolling on buying your new office space or allowing you to take advantage of opportunities with a low price for a faster sale.
