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Property Development Bridging Finance

Bridging finance is a form of short-term loan that is typically taken for a period of up to 12 months and can be used for a variety of things like debt consolidation, property purchases, and office renovations. Bridging financing is often used by property developers as a short-term solution to enable property refurbishment or construction to begin even if the initial cash infusion is not available. Property construction financing is open to you if you are a small property developer working on one or two properties per year or a large property development business with several schemes. Checkout Hearndon Construction for more info.

What is the role of bridging finance for property developers?

Bridging financing is used by many land developers to purchase property at auctions or new builds, as well as to make renovations, conversions, and refurbishments. In the absence of immediate funds, this influx of capital helps developers to get projects off the ground. Bridging loans are also used by some property developers to crack mortgage chains, purchase buy-to-let properties, and increase working capital.

A good example of when and how a property developer could use a bridging loan is as follows:

A developer has viewed two properties, both of which require renovation and both of which offer a compelling and profitable resale opportunity. The properties are well-known in the property developer community, and there has been interest from a variety of parties; thus, pace is critical, or another developer will be able to acquire these properties. A bridging loan can be used in situations where a traditional mortgage application would have resulted in the property being sold to another developer with immediate funds. Bridging financing can be made available quickly, particularly if both the property and the developer have a solid investment, allowing the developer to purchase the properties and begin renovations.

This is a classic example of how a bridging loan will help a developer purchase a property; it helps the developer to secure the property without having to sell all of their other assets or properties. This is especially useful when property is purchased solely for the purpose of reselling it for a profit. The only extra expense for the developer if bridging financing is used is the interest on the short-term bridging loan.