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Is Bridging Finance Easy to Get?

Bridging finance, a short-term loan designed to "bridge the gap" between buying and selling assets, can be a tempting solution for fast-paced financial situations. But is it easy to secure? While it offers quicker approval times compared to traditional loans, obtaining bridging finance isn't straightforward. Here's a breakdown of what determines the ease of acquiring this type of funding:

Your Financial Strength

Bridging lenders prioritise stability. They meticulously assess your income, credit score, and existing debts. A strong financial track record with a high credit score significantly improves your chances of approval. Conversely, a poor credit history or high existing debt can make it difficult.

An Exit Strategy is Key

Bridging finance is meant to be temporary, typically lasting between 1 and 12 months. Lenders will dissect your plan for repaying the loan. A clear and realistic "exit strategy,"  such as the confirmed sale of a property, strengthens your application. The more concrete your plan, the easier it will be to secure the loan.

Loan-to-Value Ratio (LTV)

This ratio compares the loan amount to the value of the asset used as security. Lower LTVs (meaning you're borrowing a smaller portion of the asset's value) are more favourable to lenders as they minimise their risk. With bridging finance, the asset used as security is often the one being purchased, adding another layer of complexity.

Property Type and Condition

The type and condition of the property you're using as security can impact the ease of acquiring bridging finance. Easily sellable properties in good condition are preferred. Conversely, unusual properties or those requiring significant renovation might be seen as more risky by lenders.

Specialist Bridging Lenders

Bridging finance isn't readily available from traditional high-street banks. Specialist-bridging lenders dominate the market. These lenders often have more flexible criteria but charge higher interest rates compared to traditional loans.

Using a Bridging Broker

Bridging finance can be a complex area. A broker specialising in bridging loans can be invaluable. They can assess your situation, recommend suitable lenders, and guide you through the application process, potentially increasing your chances of success.

In Conclusion

Bridging finance can be a solution for time-sensitive financial situations, but obtaining it requires a strong financial profile, a clear exit strategy, and a good understanding of the lending landscape. Consulting a bridging broker can significantly ease the process. Remember, bridging finance comes with higher interest rates, so ensure it's the right financial tool for your situation

This was posted in Bdaily's Members' News section by iCONQUER Ltd .