Monday, September 21, 2020
Finance

A Discussion of Commercial BridgingFinance

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Anybody who has ever arranged bridging finance for a residential property purchase will know how complicated the entire process of application can be, the situation is significantly more complex when it comes to arranging commercial bridging finance. Personal finance lenders consider bridging finance to be one of the most risky forms of lending; this statement is doubly true for commercial lenders.

There are however, some great opportunities for a knowledgeable commercial finance broker to arrange bridging finance that is not only cost effective, but will cover 100% of the actual property cost, making the capital investment for the short term an incredible 0%. Intrigued? Let’s take a look at how this is achieved.

Firstly we need to consider valuation, by choosing a lender that will allow the borrow to work from the open market value of the property, rather than the actual purchase price, the loan to value amount increases, which means that the actual loan is for an amount close to what you are actually paying for the new property. Many high street lenders will refuse to work from the purchase price and refuse to recognise such things as a good deal and any possible built-in equity in the new building.

Some lenders will also allow the borrower to roll the interest into the bridging finance, which means that no repayments will be due, as they have already been added to the loan value. This is a great way to secure a property which is going to take some time to secure, as your business will not need to find hefty load repayments each month.

It should be noted that this form of borrowing is primarily aimed at those needing to secure bridging finance in the form of a closed bridge, which, means that contacts have already been signed for the property deal, those who are seeking an open bridge will find matters far less flexible and may only be able to acquire 70% of the cost of purchase through bridging finance.