AFG Blog

How to use bridging finance for property development projects

Bridging Finance could be just the solution you need to secure and complete your next property investment project.
So, what is bridging finance? Bridging finance is a short-term loan, typically lasting 3 to 6 months, covering the period between one property-related transaction and another. Quite literally, it “bridges the gap”.
A need for bridging finance may arise when the purchase of one property needs to be completed before the sale of another one is finalised. In property development or investment, bridging finance is generally used as an interim facility to quickly secure the property or generate cash flow while other finance is put in place.
For example, a property investor may want to take advantage of a purchase opportunity at auction. Her intention may be to refurbish the property for commercial or residential letting. Bridging finance from CorpFin can be used in the meantime to complete the purchase and undertake any refurbishment. The bridging loan is repaid – depending on the loan terms – once long-term finance is secured, or in some cases when one of the properties in the transaction is sold or refinanced.
Traditionally, bridging finance, like most other forms of lending, has been the preserve of the banks, but in the last decade, they have reduced their appetite for new projects. The banks’ place has been taken by specialist property lenders, like CorpFin, that have in-house experts with the skills and resources to accurately assess a property project and to tailor the finance accordingly. Our business development managers and legal advisors work to deliver quick decisions on bridging loan applications.
When it comes to deciding whether to lend or not, a good credit history and previous experience in property development will help secure quick agreement and the lowest rates, with security being the deciding factor. If you intend to bid on a property in an auction, we always recommend obtaining an ‘agreement in principle’ before the auction day as this shortens the approval process when the specific details of the transaction are known.
Bridging finance is a flexible, short-term facility that could be vital for moving your property development project from one stage to the next. The added advantage is that the money can normally be arranged quite quickly.
Visit CorpFin for more information.