Bridging Finance – a bridge too far?
I have been involved in 300+ bridging finance deals. When clients are ‘up against it’ in a property deal and need quick finance they often turn to the bridging finance market for help. Bridging finance is a short term finance measure, which can usually be arranged much quicker than conventional funding and which, keeps the deal alive.
Of course, you pay for what you get, and bridging finance carries a premium. However, investors and developers often feel comfortable with the higher interest rate and additional charges if it means they can complete a deal quickly and not lose the potential opportunity to a competitor.
The problem is that with some novice investors and developers, they may think that their conventional solicitor is best placed to handle the legal work on the bridging finance for them. This often leads to a slow process with inexperienced legal advisers not converting the deal quickly enough. They may not fully understand the rationale for some of the more specific enquiries that are part and parcel of a bridging finance application.
By necessity, experience in handling these types of transactions leads to a better appreciation of what to ask for, what to agree to, and what to resist.
Are you considering turning to the bridging finance market?
For those nervous about getting involved with bridging finance lenders, the crucial advice is:
- Choose your lender carefully. No two lenders offer the same service and when the pressure is on to close a deal it can be difficult to properly determine who will serve you best.
- Compare the terms on a like for like basis. Don’t just look at the base interest rate – also check out what each lender will charge as an exit or repayment fee, or for extending the finance at the end of the fixed term.
- Make sure you are confident about your exit plan. Don’t go in half-hearted or with your fingers crossed. You should only proceed if you are fully geared up with reliable contractors for any planned refurbishment works and there is a viable exit from the finance, whether that be remortgage or sale.
Get in touch
Ian Millington is an experience Commercial Property Partner, based in Liverpool, who has almost 25 years’ experience. He also visits clients across the North West.
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