Bridging loans are a form of short term borrowing for businesses that need to bridge the gap between making a payment and securing another type of finance. They’re often used to secure property before a mortgage application goes through, but they can be used for all manner of business needs, provided the loan terms agree to it. How long it takes to get a bridging loan depends on a variety of factors. Read on to understand what might affect your bridging loan application timescales.
How does a bridging loan work?
A bridging loan is funded by a lender who will lend you large amounts of money on a short term contract from a few months up to a maximum of 24 months. Due to the quick turnaround and high amount of money that’s available, interest rates on bridging finance are higher than a commercial mortgage, meaning you need to have an exit strategy before you commit to this type of finance.
At Aurora Capital, we are expert bridging loan brokers and are best placed to help you decide if a bridging loan is the right type of finance for you. We can talk you through the intricacies of bridge financing and what your exit strategy might be, as well as alternative lending options.
How long does it take to get a bridging loan?
Generally speaking, bridging loans are quick to obtain. Lots of bridging loan applicants need capital quickly in order to secure a purchase or a property. In these cases, lenders are often willing to work quickly to help borrowers receive their funding in a timely manner. So, in these cases, getting a bridge loan can be a desirable option.
How long it takes to secure a bridge loan can range from a matter of days to a matter of weeks. It depends largely on the individual applicant and their chosen lender. So, how quickly can you get a bridge loan with Aurora Capital?
How quickly can I get a bridge loan?
At Aurora Capital, we work with multiple lenders who offer bridge financing. Many of our lenders are able to make a decision in principle within just 48 hours of an application being received. This means if you need a fast cash injection and don’t have time to wait for another type of loan to be approved, such as a traditional mortgage or a secured loan, fast bridging loans could help. The application process is relatively straightforward provided you meet the lending criteria.
Factors that affect how long it takes to get a bridging loan
One factor that can affect how long it takes to get a bridging loan is the credit rating of the applicant. Generally speaking, it should take less time to be approved for a bridging loan if you have a good credit rating.
How long it takes to receive bridge finance also depends on how you intend to use the loan. It can take much longer to buy a residential property with a bridge loan. In comparison, it can be quicker to receive a bridge loan for commercial investment purposes.
Lastly, your individual circumstances and financial position can affect how long it takes to get a bridge loan payment – for example, how much you are planning to contribute out of pocket. In addition, if you are willing to pay higher fees and interest rates, you will often be able to secure funding more quickly.
Bridging loan examples
There are lots of instances in which you might need to use a bridging loan as a form of short term finance. To help you better understand the concept and the uses of bridging loans, here are a couple of examples of what most bridging loans are used for.
1. Property
A standard mortgage can take a while to go through, but the risk of this is that you might miss out in today’s competitive property market, especially if the property is at auction. In this instance, you can apply for a bridging loan to secure commercial property until your mortgage goes through. You can also use a bridging loan to renovate a property if you’re waiting to release equity. Through this route, when the mortgage goes through, you’ll pay off the bridging loan before the end of the term. The commercial mortgage is your exit route. A lender may go through a valuation process where a property purchase is the reason for raising finance because they may want to see how much money they could get by selling the property if you default on payments. This will be an applicable fee for you to pay.
2. Purchase
If a large and expensive piece of equipment breaks that is vital for the running of your business, it will need to be replaced quickly. You might not have the immediate capital available to replace it, and a standard loan application might take too long. In this case, a bridging loan can give you the money you need to replace the equipment. You might then look for another, more affordable, type of loan to pay off the bridging loan. This is your exit strategy.
Bridging loan fees
The interest rate on bridging loans is typically charged per month and isn’t variable. You can choose to pay it back every month along your agreed monthly loan amount, or you can pay it back at the end. Generally speaking, bridging loans come with a 2% arrangement fee and the interest varies from 0.55% to 1.5% per month. Some bridging loans charge an early exit fee, but this depends on the lender and your exit strategy.
Quickly apply for a bridging loan at Aurora Capital
To find out more about bridging loans, to find out exactly how long it takes to get a bridge loan with Aurora Capital, or to learn more about different funding options, please contact us. Otherwise, apply for a bridging loan online to be matched with the most suitable lender for your needs.
