By its nature, bridging finance is designed to do things beyond the realms of any conventional loan; once a concept of interest to a fairly limited audience, bridging finance has really come into its own over the past few years.
The bridging sector is uniquely responsive and agile, going against the usual High Street norms with its case-by-case approach. With bridging finance, applications are considered on the basis of their individual merits, not the binary qualification criteria that would normally apply.
This essentially adds up to a unique financial product where each deal is manually underwritten. It is a significantly more personal and versatile facility than any conventional loan, harking back to when bank managers personally considered applications and made lending decisions.
Ultimately, it also offers an essential lifeline to investors in the form of a fast-access lending stream unlike anything else available on the market.
When Time is a Factor
The benefits of bridging finance become truly apparent in time critical situations. It could be that the original lender has withdrawn its offer at the last minute, there is a break in the chain or an unbeatable deal has presented itself and will not be around for long.
Attempting to cover the costs of such transactions with a conventional loan would be futile. By the time even an initial decision in principle is offered by the lender, it could be too late.
For the vast majority of borrowers, the main point of appeal with bridging finance is the speed at which the facility can be arranged. Where conventional funding options are simply too complex and/or time consuming, bridging finance comes helps vastly.
A Case Study from West One Loans
Illustrating the value and versatility of bridging finance, West One Loans recently shared details of a case study involving a client in need of urgent financial support:
“Back in April 2018, we assisted the borrower by raising money secured over the site which, at the time, comprised a vacant two-storey office block covering 9,200 sq. ft. The client purchased the site for £530k in October 2017 and subsequently obtained planning permission to build nine residential dwellings.”
“In September 2018, the client refinanced on to our development finance facility, which was used to repay the bridge and to provide the borrower with funds to continue with the development of the nine residential dwellings. The total gross development facility was £1.78m with £260k allocated on day one to refinance the existing bridging finance facility and £1.3m allocated to funding the build. It was modelled on the basis that LTV would never exceed 71% based on expected monthly drawdowns.”
“Once the development had completed in March 2020, the borrower then refinanced again onto a bridge. At the point of the refinance, the borrower had sold three of the plots, thereby reducing their exposure with development finance. The remaining six were on the market and were refinanced onto the bridge. Throughout the term of the second bridge, the borrower sold off a further three plots.”
“This year, in the last few months, the client refinanced the final three units onto to a buy-to-let mortgage, which allowed them to rent the remaining residential dwellings, bringing in some income but also repaying the bridging loan and reducing the borrower’s overall cost of finance.”
Arranged with the help and support of an experienced broker, bridging finance has the potential to be not just fast, but a uniquely affordable facility.
With extensive delays having become the norm with most major banks and lenders, the popularity of bridging finance is only set to continue growing.
