What is a bridging loan?
Bridging loans are short-term loan facilities that can help businesses buy and sell a property or refinance from one lender to another.
MoneySmart tells us that a bridging loan is short-term finance that covers the period between buying a new property and selling your existing property.
For example, companies may need short term bridging finance when they purchase property before securing a loan. With settlement looming, companies find themselves stressing when their primary lender of choice has long turnaround times that do not match the settlement period or if they have committed to purchasing a property at an auction and are required to settle within a short period. A bridging loan essentially ‘bridges the gap’ between settlement and securing your long term loan facility.
Some companies might purchase a property and look to deleverage their overall debt by selling another asset before finding a more long term lending facility. A bridging loan can also help here for the duration of the sales period. The proceeds will then either pay down the whole loan or a portion of the loan when the property sells before the company refinances the bridging loan with another lender.
Bridging loans are generally more expensive than a long term facility in exchange for the flexibility to purchase a new commercial or investment property before you have sold an existing property or asset. They can also allow you to capitalise the interest, so you are not burdened with interest payments while you find a solution that is better suited for your business. In addition, having more time means that you can breathe easily, as you have more time and control over your asset strategy!
You have more control over your loan term and interest repayment structure, and you can settle quickly with a bridging loan.
As bridging loans are short term facilities, you can select a loan term of up to 12 months. However, due to the higher interest rate in exchange for speed to settlement and loan flexibility, most businesses do not want a bridging loan longer than 12 months.
At Sparrow Loans, we offer bridging loans secured by property assets without a minimum loan term requirement. You can choose a loan term as little as one week without being charged interest for a more extended minimum period. This flexibility offers companies the chance to minimise their cost of bridging finance while enjoying the benefit of a quick settlement within two weeks! In addition, we offer LVRs up to 75% for most property types and can approve your loan within two business days!
If you’re looking for a private non-bank lender that can settle quickly and smoothly, then have a look at our Bridging Loans. If you have an urgent transaction that needs to settle within the next two weeks, we can help!