Bridging finance is especially handy to property developers who need access to money fast in order to secure a property. This article explores a few of the ways in which property developers make use of bridging finance.

Bridging finance is effectively a short-term loan, normally used for a period of up to 12 months which can be put to a range of uses from grouping debts, purchasing new property or starting an office refurbishment. Property developers often rely on bridging finance as a short-term solution that will allow property refurbishment or builds to advance even if the initial injection of cash is not present. Whether you are a small property developer developing just 1 or 2 properties per year or an experienced property development business with lots of ongoing developments bridging finance is available for you.

In what situations would bridging finance be useful to a developer?

So what and when would a property developer use this loan for? Well, there are a few of situations:

1. To purchase new property for their portfolio at auctions,

2. For large scale refurbs., upgrades and conversions,

3. To commence projects in the absence of cash,

4. To facilitate the release of a property from a chain,

5. To acquire a buy-to-let property,

6. To generate working capital.

Lets have a look at an example of developers using this finance:

Having spotted 2 properties which are in need of substantial works prior to selling on, a property developer needs to put an offer in fast as they understand that their rivals will also be curious. The developer doesn't have the required funds to hand, but can afford the investment. Instead of going through the lengthy process of raising the capital by selling assets, the developer chooses a bridging loan instead. This bridges that gap between purchasing the new properties and freeing the funds locked in current assets.

This is a very clear example of the sort of use property developers have for bridging finance. When a property is acquired for the sole purpose of a quick resale, bridging finance can be an easy and accessible way to secure the deal. The only supplemental cost to the developer would be the interest on the loan, which could be absorbed by the resale profits. Bridging loans are also fantastic for those developers who want to lessen or manage their costs and equity or are looking to start draw downs across an investment portfolio to release some cash.