“We need a bridging loan to secure this deal and we need to get one fast!”

These words are the battlecry of many a property entrepreneur in the UK right now. The need for a bridging loan or some other kind of immediate finance is vital in the current market. Property prices have seen historic drops since late 2007, giving rise to some first-class opportunities for those that can get access to money quickly.

Despite their special characteristic of speed (i.e. bridging loan underwriters tend to know the specific kind of property they can accept all day long), there are times when a bridging loan is not actually a bridging loan at all. Let’s identify one of those situations when you think you are requesting a bridging loan but, in fact, you are actually asking for something else.

You see, a bridging loan can be used almost anywhere in the world and for virtually any purpose. From Croydon to the Caribbean and for pizza businesses to property portfolios, the bridging loan stands on its own in securing a deal for you – quickly.

Some transactions are an ideal setup for a bridging lender (or so it would seem). For example, imagine you’ve got the transaction below, a deal that could comfortably make you £450,000 or more for not a massive amount of work:

Prime Location property (think Central London)
High value property (think £5 Million plus)
And plenty of “skin in the game” on your part as the borrower (see yourself with a minimum of £2 Million)

So tell me, what more could a lender want from you? Surely a transaction like this is the ideal bridging loan isn’t it?

Well yes … almost.

Something is missing from this “perfect scenario” and that something is the Exit Strategy.

Without a clear, defined and all-but-concrete exit strategy, what does the bridging loan transform into? It moves from being a bridging loan to being “equity participation”. In less technical terms, what started off as a loan to you changes into an investment by the lender who is now hoping that he is able to profit from the sale or refinancing of the property.

This is what borrowers continually forget. If they don’t have an exit plan for the project, then a lender becomes an investor and is taking a stake in something that may, or may not, pay off. The exit must be virtually assured. You are the one that wants to own the asset (even temporarily); the lender does not. They want to get paid an upfront fee for lending money and then earn interest on a loan.

This is when a bridging loan is no longer a bridging loan. When a borrower doesn’t already have an Agreement in Principle to refinance; or they don’t have a guaranteed buyer to close the project successfully, then that same borrower will very likely struggle to get the bridge finance quickly in the current market. (The exit doesn’t have to be cast in stone. Something close can also be enough. But it does need to be close.)

There is the saying that we should “Begin with the end in mind” when it comes to achieving goals in life. The same can be said of bridging loans because bridging lenders do not want to take a stake in your project, even by accident. They want a simple answer to the following question:

“How will I get my money back quickly and painlessly if I give you a bridging loan?”

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Securing a bridging loan is a challenge. Bridging Loan Direct will help you get the bridging loan that you need, within your timeframe.