When it comes to residential, commercial, and even industrial real estate, bridging loans are the potential buyer’s best friend as these are a good source of ready cash to make immediate purchases (or to avail of bargains and even excellent deals at auctions.) They may cost a bit higher in terms of interest, but they definitely do come in handy when you need to seal a deal.
But did you know that bridging finance can also be used for other purposes? For example, you can take out bridge loans to cover necessary expenses until such time that your organisation’s finances are more fluid. Likewise, there is a category of bridging finance that you can use to fund the construction or refurbishment of property. Planning to take out a loan for construction projects? Consider the options we have on offer before making a decision.
What is Construction Bridging Finance?
Construction bridging finance, also known as construction bridge loans, is a form of short-term financing that can cover the cost of building.
Unlike other forms of bridging finance, where you can get the full amount of your loan in one go, construction bridge loans are often paid out in instalments as your project progresses. Of course, some lenders do pay a full lump sum for construction financing, but this is only done when the loan is meant to cover a specific stage of the building project.
What are the Reasons for Taking out Construction Bridging Finance?
There are actually several reasons why you should consider a construction bridge loan. These include:
- You need to make some serious adjustments to your budget or if an emergency comes up;
- You need to make up for a monetary shortfall;
- You’re working on several construction or renovation projects and want to have enough with which to fund them all; and
- You need to pay the wages of your work crew, utility bills, or even suppliers’ bills.
Benefits of Construction Bridging Finance
Flexible repayment terms
Construction bridging finance offers flexible repayment terms and pays out on approved dates. This means that you’ll be free to accommodate your cash flow needs without worrying too much about defaulting on payments. As with other forms of bridging finance, construction bridging finance allows you to make smaller payments on a regular basis depending on the terms you have negotiated with your lender.
Quick and easy approval
You can get up to 80% of your loan in just a few days, with potential for more than 100% in some cases. With these types of loans, you can rest assured that there are lenders out there who will be willing to lend their support for people working on construction projects. The approval process is generally quicker compared to other types of financing, and the funds are released quickly.
Affordable solution for financial needs
Bridging finance can offer an affordable short-term solution to your financial needs. It provides sufficient funds to pay the wages of your work crew or suppliers, or to cover utility bills, or to pay the cost of materials used in the construction project. Depending on the amount you will borrow, this type of financing can also cover your other expenses up to a certain percentage.
How Does One Secure Construction Bridge Finance?
First of all, you need to shop around and see what options are available to you. Rates, after all, differ among lending agencies and independent lenders, so it’s best to see who offers the best terms, the most reasonable interest rates, and the most flexible repayment terms.
Second, you need to be ready with your paperwork. Lending companies appreciate a prepared borrower. Therefore, be sure to bring ample documentation regarding any previous experience in the construction industry, along with your detailed schedule of work and budgetary chart for the project you’re working on. Having enough information on hand actually improves the chances of your loan getting approved.
In the case of first-time developers or individual homeowners working on a construction or refurbishment project, be sure to have a good working idea of your project before approaching lenders.
Take note that, once you and the lender have agreed upon the schedule and terms, funds will be released only on the approved dates. Also, your lender will be keeping an eye on the project to make sure that you’re running on time and are committed to its completion.
Construction bridging finance is a way for real estate developers, builders, or individuals to cover their cash flow and financial needs during a period of temporary liquidity limitations. It’s also often used to bridge the gap between the end of one job and the beginning of another.
As we know that bridging finance is crucial for the construction industry – both because it offers an affordable solution for short-term liquidity requirements and also because it offers flexible repayment terms – we hope this post has provided you with some useful information such as how construction bridge financing works, as well as how it can be beneficial to those who need funding in order to complete or carry out construction projects.