The growth of bridging finance for business
Many businesses are using bridging finance and this is contributing to the high demand for bridging loans.
The Association of Short Term Lenders (ASTL) that represents bridging finance companies reported that, in the first quarter of 2017, the number of bridging loan applications increased by 14.9% compared to the previous quarter. The ASTL predicts that this growth will continue throughout 2017.
Although the majority of bridging loans are used by individuals to break house buying chains, many businesses are using bridging finance to finance business growth and investments. This has added to the high demand for bridging loans.
Many businesses rent office space and, due to expansion, may need to move to larger offices. Moving can be costly, which is why some companies use bridging finance to raise funds for their office move. The loan can be repaid from the extra income generated by the business expansion.
Sometimes, a bridging loan can be used by companies for property investments that mainstream investors will not touch. An example of this is where property has been empty for some time and an investor wants to develop the site. Without tenants in place, mainstream lenders can be reluctant to provide a loan. A bridging lender will look at the potential of the property, the expected rents, lease terms and costs. If they assess the project as being financially viable, they will provide a bridging loan.
Bridging loans are short-term loans that can be arranged quickly, making them ideal for time-sensitive deals.