Specialised financial solutions have become an increasingly attractive and useful option for individual investors and businesses alike. Bridging loans needn’t be confusing to understand. However, there are significant things that brokers and borrowers need to understand about short term finance. We have conducted market research to understand the questions brokers and borrowers have when it comes to bridging finance. In this guide, we will cover what feel are the most important topics to ensure that you have all the information you need to make the best decision.

In our guide to bridging loans, we will cover:

1. What is a bridging loan?
2. The CRK Finance Loan Process
3. What type of borrowers typically apply for a bridging loan and what are the benefits?
4. What are the potential risks associated with bridging loans?
5. Where can your clients apply for a bridging loan and how much can your clients borrow?

What is a bridging loan?

A bridging loan is short-term finance option (normally 12 months or less) available for borrowers that require a fast loan to ‘bridge’ the gap between a payment going out, and money coming in.  They are typically used when buying a new property and selling existing property. A bridging loan is often used to allow property investors to complete a purchase whilst their longer term mortgages are agreed.

Whilst it is principally used for commercial or residential property transactions, you can also apply for a bridging loan to cover any other short term financial requirements that borrowers may have. However, due to the speed in which bridging loans are made available to borrowers, they can be more expensive than other mortgage options, so it’s important to understand when short term finance is the right choice.

The CRK Finance Loan Process

When opting for a bridging loan, it is imperative the borrower understands how they work in order to avoid disappointment or lengthy delays in application.

The CRK Finance Loans Process:

1. A brief summary of the loan is given by the broker or a client. On review of this CRK Finance issues an indicative offer stating the terms of the proposed finance and what documents are required. This is usually completed within 48 hours.
2. Full Application form is filled out along with financial profile of the client
3. CRK Finance instructs the valuation upon confirmed receipt of valuation fees by the surveyor.
4. Solicitor instructed by lender upon receipt of fees
5. Facilty Agreement and all other legal work is carried out
6. Client and Lender sign all documentation and return to solicitor
7. Funds are released to the solicitor for completion

The process will usually take between 14 and 30 days (depending on property circumstances, searches and surveyor reports).

What type of borrowers typically apply for a bridging loan and what are the benefits?

More and more people are successfully applying for bridging loans, and as bridging loans increase in popularity in the UK, the utility of these loans is also expanding. Short term finance enables borrowers to take advantage of exciting opportunities, secure must-have property deals and solve unforeseen crises, which they would have otherwise been unable to do.

Bridging loans can be a fantastic option for businesses, landlords, property developers and individuals alike. Whilst typically used to cover shortfalls in property investment capital, bridging loans are also used to help fund renovation and development, auction transactions and to help businesses with short term cash flow difficulties.

Why would businesses apply for a bridging loan?

1. Commercial property purchase
2. Renovation or development of commercial property
3. Inject sizeable amounts of cash into businesses when they need it most

Why would individual investors apply for a bridging loan?

1. Landlords looking to buy a new home, build a home or renovate existing properties
2. Individuals needing a stopgap financial solution
3. Auction sales to bridge the gap between buying and selling the item in question
4. Downsizing often does not require a mortgage as the sale of a previous house will cover the new property

The main benefit of bridging loans for most borrowers is the speed in which they are able to obtain the loan, with a much shorter application process than longer term finance options.

What are the potential risks associated with bridging loans?

As with all loans there are some potential risks which are worth considering before applying. Like most short-term finance options, bridging loans often have higher interest rates and incur more expensive admin fees than longer term finance option. This makes it paramount that borrowers are aware of the fees in advance, to minimise risk of capital.

Where can your clients apply for a bridging loan and how much can your clients borrow?

CRK Finance determine how much they are willing to lend based on how much liquid capital they have, the value of the property, the borrower’s individual circumstances and the repayment strategy put forward.
CRK Finance creates bespoke bridging finance solutions for our customers that are fast, simple and reliable.

For more information get in touch with us today