A bridging loan is a short-term facility, the typical term being for a period of 2 weeks to 1 year. A bridging loan is used to ‘bridge’ the gap between a debt or sale coming to fruition and is secured with a first legal charge over the property to be acquired within a defined timescale agreed at the outset.
Interest is typically serviced monthly, but depending on the loan to value and term can also be rolled up and repaid on expiry. Bridging loans are really useful in the property industry as property transactions can often require a quick turnaround time, which may be too soon for a senior lender to fulfil all of their pre-drawdown..
There are some fantastic benefits to a bridging loan:
- It is a great source of short-term cash to enable a business to secure a development or investment site,
- It is quick to be agreed,
- It is quick to draw down.