Bridging Loans to Help and Aid the Property Developers in UK
A bridge loan as the name evidently suggests works like a bridge. This means that a bridging loan is a means of a short term finance that bridges the gap between times when funds are not available as against the time when funds actually become available. Once that the long term finance becomes available, the bridge loan is paid off and with the loan money and the remaining amount is then used to fulfil other capitalisation needs. This loan is a great option for any individual who finds himself stuck between the early outflow and late inflow of finance or liquidity.
Bridging Loans for Property Development in UK
Property development might involve huge costs for purchase of land, building materials, carrying out the construction process, paying off wages and salary and the like. However, as far as property developers are concerned, this financial crunch continues only till the time the property is under construction and once the construction is complete, the property can be sold off almost instantly to lead to inflow.
Property development in the UK is on the rise but the sources of mortgaged loan and its availability is on a decline. This means that property developers in the UK have to resort to other finance options in order to meet their monetary needs. However, even though bridging loans are a great option for short term finance, there are a few factors that need to be looked into before a final decision regarding the bridging loan is made.
Points to Note While Applying for a Bridging Loan in UK
As already stated property developers in UK have been resorting to bridging loans by chance and not by choice. However, long before a property developer settles on the prospect for applying for a bridging loan, he needs to take care of certain facts. Before availing a bridge loan, one needs to understand that the rates of interest are generally sky rocketing. This can have further implications like the use of a short term debt component might inflate your cost to a very high figure deeming your final price with for your customers to be not so competitive. But the availability of cheap loans from finance houses who work in collaboration with other finance house and investors alike have relieved property developers from this headache.
On the other hand, a bridge loan is a short terms finance, which means that it has to be off within a short span of time. Before applying for a property development bridge loan, the property developer will have to ensure that by the time the loan becomes due for repayment, he or she has the necessary funds at hand. The loan can be paid off by the means of refinancing or the money that flows in after the completed project is sold off. Application of a bridge loan can be both in terms of construction of residential and commercial property. Availing a bridging loan is quite easy as the market is full of such options from finance houses who work in collaboration with other large and small financers. Thus a careful cash flow needs to be planned and looked before any decisions about the bridging loan are actually made. In spite of the rate of interest on the loans being really low for the property developers in UK, repayment can be one big problem.