Bridging Loan
When a business needs short-term finance for the purchase of a large property or moving to a new commercial premise, we, at Commercial Construction Loans, are ready to give you the best solution. In this case, a commercial bridging loan could be the best thing. Before considering this loan for your new commercial property, it is better to get a complete idea of what it is actually.
What is a bridging loan for a commercial property?
A bridging loan for commercial properties is a kind of secured business financing. This short-term financing option is used when there is a gap in funding, which needs to be filled quickly. These loans serve as an interim source of finance before a borrower finds a permanent financing solution. Simply, it can be said that a commercial bridge loan assists in ‘bridging’ a payment gap.
Bridge loans for commercial properties are primarily used by investors or business owners for commercial real estate purchases to close on a property at a fast speed. If you are a business owner in Australia and may not have the funds to buy a new commercial property until you have sold your existing one, in this case, you can apply for a bridging loan at Commercial Construction Loans in Australia. Such loans offer access to cash during this conversion period to fund the purchase of the new commercial property premises. These loans on commercial property are generally repaid when a property is sold or when new commercial finance like a commercial mortgage is approved.
Commercial Construction Loans provide bridging finance for different kinds of commercial properties such as:
- Factories
- Retail locations including shops and restaurants
- Warehouses
- Offices
- Hotels, pubs, and nightclubs
- Business parks
- Care homes, etc.
Types of bridging loans
Commercial Construction Loans offer two types of bridging loans for commercial property purchases. These are:
Open bridging loan
It is normally a more flexible option than a closed bridging loan. It is ideal for those borrowers who have not yet finalized the sale of their current property. Under this option, you can access funds for a more extended period, generally up to 12 months or in some cases, longer. With the help of this extended loan term, borrowers can have more time to sell their current property and repay the loan. There is no fixed repayment date, eliminating the pressure of fixed monthly repayments. However, these loans may have a greater interest rate than closed bridging finance.
Closed bridging loan
Closed bridging finance is typically provided over a shorter duration of time than open bridging loans. It is perfect for those borrowers who have already signed and exchanged sale contracts on their current property. This type of bridging finance has a limited loan term, which is for a few weeks or months. Under this loan, a borrower needs to repay the loan promptly upon the settlement of the property sale. It has a fixed repayment date. So, the good news is that it has a lower interest rate as compared to open bridging finance.
Pros
- It can ensure you can purchase your property right away without waiting for your current property to sell
- If the timing is accurate with the bridging finance and the purchase/sale, it could be easy and possible to avoid the hassle of going on rents and costs associated with renting in the period between the sale of your current property and the settlement of your new property.
- Based on how your loan is structured, you may only require making repayments on your current mortgage during the bridging period.
Cons
- There is a lot of risk involved in this type of finance. To protect you from risks related to large interest bills, you need to sell your current property at a higher price than your loan time.
- Interest is generally charged every month, so the longer you take to sell your recent property, the more interest your new property will tend to accrue. In case your current property is not sold within the bridging period, you will generally be charged a higher rate of interest.
- This loan may need two property valuations, leading to two valuation fees, and additional charges for the extra loan.
How Commercial Construction Loans can help you?
We are one of the leading loan providers in Australia when it comes to commercial properties. We can help you by providing bridging loans after assessing your loan requirements. If you meet the eligibility criteria, then you are all set to buy a new commercial property with no need to sell your current property at the same time. But there is a bridging duration period, in which you will have to sell your current property. If you are interested in applying for a bridging loan, then we can be of greater assistance. Approach us and get funds within 48 hours of applying.