“A bridging loan is what we need. And fast!”

Property entrepreneurs across the UK are repeating these words. In the property market of today, immediate finance such as a bridging loan is essential. Since 2007 we have seen unprecedented reductions in property prices and this trend has thrown up some incredible profit making opportunities for people who have immediate access to money.

Bridging lenders normally know what properties they can or cannot accept, this is the very basis of what they do and this knowledge is the foundation of their business. But that said, there are still times when a bridging loan turns out not to be such after all. We are going to take a look at how asking for a bridging loan can turn out to be something much different.

A bridging loan is specific to the deal or business transaction you are trying to secure and is designed to achieve this with speed. Standard loans are not purpose specific and can be used for almost anything.

Most of the time bridging lenders can identify which transactions are ideal for them and which are not but this is not always the case. Below is a good example of this. Imagine the following transaction is yours, and it is one that could easily net you 450,000 pounds, and there would be relatively little work involved.

*A superb location for a property (e. G. Central London)

* A property with a current high value (in excess of 5 million pounds)

*You are the borrower with over 2 million pounds of property and experience under your belt

On face value this kind of transaction is what lenders want every day. Surely, this has to be the perfect loan doesn’t it?

Well it is close to ideal but not quite close enough.

To make this the transaction ideal, one missing piece must be in place and that missing piece is an Exit Strategy.

Until this deal has a solid exit strategy set in stone, it is more of an equity participation than a loan. So instead of the lender conducting a simple and safe transaction, he has now inadvertently invested his money. Hoping for a timely and profitable return on the investment, the lender is left wondering if any profit can be made from the sale of the property in order to recover his money.

This is a good example of what borrowers tend to forget. As a borrower without a firm exit plan, you have made the lender an investor in a project that could potentially go bad. This is your project, not a joint venture with the lender; he does not want to own the property. All he wants is to be paid a fee upfront for the loan and profit from interest charged on that loan. Before you enter into a deal, you must be sure of exactly how you are going to exit the project.

If a borrower does not have a buyer ready to close the project or an established agreement in principle to refinance, then it is possible the borrower will find it very difficult to get the bridge finance fast enough for the current market. If the exit plan is not solid, one that is almost guaranteed will suffice, but anything less than that can be dangerous for the lender.

Before you actually begin any project you should first consider how it will end. So in the case of a bridging loan, you need to know how and when you are going to repay it. Lenders also want to know that they are entering into a safe deal and to be sure of this they will just ask this question:

If I give you a bridging loan, how and when do you intend to repay me?

Learn more about what a bridging loan can do for you and their impact on your financial decisions. Go now to the Bridging Loan Direct website. An associate bridging loan expert is waiting to help you