Bridging loans are a source of short-term finance secured in most cases on land or property. Bridging loans are used when there are tight timescales and money is needed fast. Typical examples include when a second property is bought before the first is sold and when property is purchased at auction. Whilst slightly more expensive than conventional bank loans and mortgages, a bridging loan offers many advantages for the commercially aware borrower:

• Bridging loans can often be delivered within a few days of application
• Bridging loans can be non status, i.e. income details, historical accounts, cash-flow projections will not be required
• The finance is based on the open market value of the property, irrespective of the purchase price, meaning in certain circumstances 100% funding of the purchase can be achieved
• Bridging loans can be a useful tool when negotiating the purchase of a property as the borrower can complete within a short space of time.

Using bridging loans to finance up to 100% of a property

A classic case for this type of funding is where a property is being purchased at a discounted price. The bridging loan would be used to fund up to 100% of the purchase price, whereas conventional funding would be based on the lower of the purchase price or valuation. The bridge is used for a short period (a couple of weeks or months) whilst the property is refinanced onto more conventional long term funding.

Although traditionally used to buy property or businesses, bridging loans can be used for a number of other reasons such as holidays, weddings, home improvements and renovations, or improving cash flow.