A bridge loan is a short-term financing option that helps finance the gap between a purchase and the arrangement or possibility of arranging a longer-term source of financing. Usually lasting between 3 and 24 months are worth consider whether you need immediate funds to proceed with a new business while waiting for cash. The most common use of bridging financing is to allow you to buy a new property while waiting for the sale of your old property.
But as with any loan, there are many criteria and expenses to consider before and during your application. Experts recommend exploring and understanding the relevant factors before deciding if a bridging loan is your best option. Here is your bridging loan application checklist.
Things to avoid when applying
● Fuzzy communication
Avoid unclear communication when applying for a bridging loan to improve your chances of success, as lenders are likely to approve your application if you communicate clearly with them. Clear communication during your application will consist of informing your lender of any present or past difficulties and of your current situation. Transparency is essential for a fast and efficient application process, so it would be best to prioritize this.
● be secretive
It is essential to understand that the information you provide to lenders influences the key details of your loan terms. You need to avoid secrecy during the bridging funding application process if you want to get the terms right for you. Therefore, be honest at every step of the application process by telling your lender what they want to know, especially the reason for your borrowing and your true financial situation.
● to be unprepared
Lenders and brokers prefer to work with organized borrowers for all types of loan applications. Therefore, being disorganized will significantly hamper your chances of success when applying for a bridging loan. As such, you need to know some key details that will be asked of you during the application process, such as how much you need, your repayment plan, and why you are borrowing.
Things to do when applying
● Broker search
It’s no secret that lenders offer bridge finance borrowers varying terms and conditions and a reputable broker like Finbri can connect you with lenders with better loan terms and conditions compared to others. As such, it’s always best to research your options to find a broker who will get the best bridge loan for your unique needs.
● Talk about exit strategies
Your repayment plan is basically the exit strategy for the loan. The plan you select limits the overall effectiveness of your loan, but is crucial when applying because it specifies your quick repayment plan. Any lender will surely require it to prove your ability to repay before granting you a bridging loan.
● keep an open mind
Your lender will generally want to learn as much relevant information as possible during the application process. Therefore, they will ask you about your financial records and how you intend to use the funds. It is prudent to be frank with your lender and receptive to their advice to increase your chances of obtaining a favorable result.
● Know your deadlines
A convenient schedule and cash flow can help you pay off your loan quickly, so keep that in mind. Bridge loans are time-limited, so decide when to use your bridge loan to pay off what you’ve borrowed and any additional expenses. Your convenient schedule will undoubtedly help you repay on time. However, consider this in advance after deciding if you can complete the job and pay it back in 12 months.