Many people will have heard of bridging finance as a way of raising finance in the short term to pay for a house before the sale of an existing house has gone through. Not many people however have though of using bridging finance to help with business and commercial aspects. There are some situations in business when a short term cash injection is essential and commercial bridging finance can help with this.
For example a business owner wants to take his business to the next level and is looking to move his headquarters to a bigger and more modern building to cope with the growth of the company. He has also seen the perfect place for his new headquarters but he has a problem, the sale of the old headquarters hasn’t gone through so he doesn’t have the finance to purchase the new building. This is where commercial bridging finance comes into play. The commercial bridging loan would be quickly lent to the business owner in order to pay for the new headquarters and move his business forward without delay. The business owner can then pay back the bridging loan once the sale on his old building has gone through. Other examples include purchasing new factories, warehouses, call centres, existing property expansion or a new office.
Commercial bridging finance loans usually command a high interest rate and are known to be very complicated and have many acceptance terms and criteria’s which will need to be met upon application. A property must also be used as collateral for the loan in case of the borrower defaulting on payments. The lender will continue to have a financial right over the property until the bridging loan is fully repaid. Repayments are usually structured over a period of between three and 12 months.
Commercial bridging finance can be used for other aspects of business apart from property or land. Start-up costs of some businesses can be very high, a commercial bridging loan can be used to purchase stock, staff and equipment needed to get the business off the ground, the loan can then be repaid when the business is generating revenue. Other examples include if a business is expected to be sold, a bridging loan can be used for operating costs until the sale has gone through or simply for a short term cash injection.
Commercial bridging finance can be a very effective way of bridging the gap between financial transactions and periods of financial shortages. Finding the right commercial bridging loan which fits the business’ exact needs and situation is essential and a commercial mortgage broker would be in a good position to do this.