Richard Butler Creagh Shares about Bridging Loans
Welcome to the Richard Butler Creagh blog. Richard Butler Creagh founded Henley Finance in 2013. a short-term bridging finance company that specializes in loans between three months to a year, of £100,000 to £1,000,000 for experts in property development. Here we explain the basics of bridging finance loans. Read on to find out more.
People who take out mortgage loans know the concept of bridging loan or bridging insurance, It is used to secure a liability to the bank or another secured creditor until the mortgage is established on the property. A mortgage loan for a mortgage of a house or flat, or even land. However, before the borrower formally registers a mortgage with the bank in the land registry he secures his interests through bridging insurance. A short term facility securing interest in the property
A bridging loan granted to entrepreneurs has a slightly different dimension. Namely, it is granted in the form of assistance in the implementation of the investment. Its aim is to secure investment and develop the property before it is ready to re-mortgage. Further, in Europe bridging finance is often used to secure European Union subsidies for projects.
The basic purpose of the bridging loan is to enable or facilitate the implementation of investments From the moment the beneficiary incurs the first expenses related to the project implementation until the moment the refund is received, he may use the own funds or just from the bank’s funds as part of the bridge loan. The loan may be granted on a one-off basis or in tranches, up to the amount of the subsidy granted. It helps in maintaining financial liquidity before the project is due and receiving a refund.
How to get a bridge loan? Depending on the lender that offers the bridging loan, other conditions may apply. The loan is usually granted on simplified terms and it is easier to obtain it then, for example, receiving a positive decision from the bank on your investment loan application for the company. As a rule of thumb, the only security for the bridging loan is the assignment of rights under the co-financing agreement with the attached blank promissory note of the borrower and the security vested in form of a mortgage.
When the bridging loan feasible? Bridging finance is one of the more expensive form of financing the project and at the same time, it is the most popular amongst new developers who might struggle with big lenders due to lack of investment history. The concept from the perspective of bridging company is to secure the loan with equity. If the finance is 70% of the loan amount it should be feasible. However, one thing worth considering is that the interest is paid monthly and often one or two months of none payment will trigger default interest which will eat the equity very quickly. Therefore, it is worth considering the value of the project and rolling up the interest for a period of time. This has to be carefully planned as not only it will increase the initial debt but interest payments thereafter.
Richard Butler Creagh, founder of the Henley Finance offers fast, flexible solutions to your bridging requirements. The Henley Finance team has decades of entrepreneurial experience in the financial and real estate sectors. Read more about Richard Butler Creagh online here. Like Richard Butler Creagh on our official Twitter page and keep up to date with the latest finance news. Join Richard Butler Creagh professional network on Linked here.
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