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The Bridge loans certainly carry higher fees which may include the following:

  • Administration Fees;
  • Arrangement Fees;
  • Legal Fees;
  • Completion Fees;
  • Valuation Fees;
  • Exit Fees; **
  • Broker Fees (normally non-disclosed).

And, a fee charged to redeem the loan, typically equivalent to one month’s interest payment.

As most bridging Loans are not regulated by the Financial Services Authority, the above fees may vary substantially as they fall within no criteria or guidelines, only competitive pricing.

Bridging Lenders could consider loans to discharged bankrupts and clients with adverse credit such as CCJs and IVAs. They will lend to individuals as well as Businesses, Ltd. Companies and tax efficient vehicles such as SPVs, etc.

Types of Bridge Loan

Closed Bridging Finance 

At a time when the funds are drawn down there is a firm exit in place to repay the loan, normally within a short period of time. The most common use of Closed Bridging Finance more often is the pending sale of an existing property on which contracts have been signed and exchanged/missives concluded.

Open Bridging Finance

At a time when the funds are drawn down there is no fixed exit or repayment method for the lenders’ comfort, only an agreed maximum term that the loan may run for. Seen as higher risk than closed Bridging Finance, it is therefore more expensive.

Usage of Bridge Loan

It can be used for Below Market Value (BMV) purchase instrument where the initial purchase take place at the lower purchase price allowing a subsequent refinance application to be placed with a mainstream lender for borrowing. The borrowing is based on the Open Market Value of the property with the purpose of releasing the difference in equity between the purchase price of the property and the higher resulting remortgage loan.

Bridging Loans typically cost between 1-2% per month. Variable rates with margins over Libor can sometimes be applied as an alternative or an addition.

Other options of Short Term Finance:-

Mezzanine Finance

Mezzanine Finance is a combination of debt and equity stake which is typically used to finance the expansion of existing companies. To secure mezzanine finance the business would normally have to demonstrate a track record in the industry with an established reputation and product, a history of profitability and a viable expansion plan for the business (e.g. expansions, acquisitions, IPO, etc.).

Private Financers

Should Bridging Lenders decline to lend, PRIVATE DEBT AND EQUITY FINANCERS can be sort to provide funding but, this type of finance is normally very expensive.