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Bridging Finance
Some projects require a loan that can provide a short-term solution or flexibility, perhaps with a fast completion process, in this scenario you would obtain a Bridging Loan.
Bridge Loans can be secured by way of a first or second charge against a wide variety of assets such as land or buildings and sometimes other assets. The bridging market usually offers lending facilities up to higher levels of loan to value and sometimes facilities are secured against multiple assets to enable clients to receive even higher leverage.
Interest is payable through various options suited to the borrower or the scenario so costs can be serviced if the asset is income producing or rolled up if required.
Often property developers will use bridging loans to purchase development sites or existing properties in order to seek planning consent for a project. In this scenario we can usually reduce finance costs by utilising the same lender and increasing the loan to cover development costs. Occasionally construction will be completed and a bridging loan used to repay the existing debt for a lower cost of finance or to release equity from the completed project for another use, which is called a development exit loan.
DEVELOPMENT EXIT EXAMPLE
Many clients utilise bridging loans to secure their project or opportunity where other forms of finance are not suitable.
Development Exit Example
Below is a worked example for a development exit loan;
Project
- £4,000,000 – Gross Development Value
- £2,000,000 – Existing Loan Balance to be repaid
- £3,000,000 – Total Facility available for 75% of £4m GDV
- £250,000 – Finance Cost to be retained from new loan
- £750,000 – Remaining Facility Released to Borrower
Therefore in this example, the borrower would be able to release £750,000 of equity. This could be utilised for another project or various other reasons without waiting for all of the properties to be sold on the existing project.
When you work with Aureum Finance you will benefit from a team that holds decades of lending experience. We are here to help you find the best solution for your funding requirements.