8 Things You Need to Know About Taking Out Commercial Bridge Loans
8 Things You Need to Know About Taking Out Commercial Loans
Do you need to take out a loan for your next business space but don't have any experience doing so? To help, here are 8 things you need to know about commercial loans.
A staggering £486 billion.
That's how much the commercial property investment value was in the UK back in 2016. In London alone, commercial property investments topped a £250 billion mark in the same year. This means an increase of £3 billion from the £247 billion of 2015.
What's more, Colliers International forecasts that the growth won't stop this year. According to the organisation's predictions, the volumes of UK commercial property will go beyond £50 billion in 2018.
This already shows us how booming the commercial property sector is. And why you'd want to explore your options in commercial loans as soon as possible.
Because with a loan, you can tap into this multibillion-pound industry. And because it's through a loan that you can finally secure that office space for your business.
So, use this guide on the 8 things you need to know about getting the right bridge loan.
1. Not all Bridge Loans are Commercial Loans
For most business owners, buying a piece of property for their organisation almost always involves a commercial loan. After all, it's a pricey venture. In the central business district of London alone, the average cost per square metre already reaches £3,300!
The massive expenses associated with commercial building is the main reason commercial property loans exist. And one such type of financing available is the bridge loan.
At its core, you can use a bridge loan to purchase commercial property. In this way, it's much like many of your usual commercial property loan options.
But it differs from a standard commercial mortgage, especially when the talk comes to terms. And by terms, we mean the length of time you can keep paying for the loan.
2. The Temporary but Ideal "Bridging" Loan Option You Have
Commercial bridge loans offer a temporary financing method as opposed to the longer-term regular commercial loans. This means that you can use them on a short-term basis until you secure a longer-term funding program.
Say, for instance, you want to start the construction of new office space for your business ASAP. However, you're still waiting for funding from a traditional commercial mortgage lender. You know that this can take months, but you can't afford to wait for the construction to start.
In this case, you may want to apply for a commercial bridge loan. As the term already suggests, it'll serve as the temporary bridge between the construction and the time you can get access to longer-term funding.
3. Quicker and Easier to Secure than Traditional Loans
Another reason many business owners opt for commercial bridge loans is their quick and easy application process. As opposed to a traditional commercial mortgage, you can have the funds from a bridge loan much sooner.
Of course, there are still several qualifications you need to meet, such as ensuring complete paperwork. However, as soon as the lender has verified the ratification process, and you've signed all documents, you can expect the loan amount to come your way immediately.
And by immediately, we mean instant bank transfers.
4. Faster Approval Comes with Slightly Higher Interest Rates
Bridge loans are great for temporary commercial funding because of the speed of their fund transfer. However, you should still practice caution before signing the dotted line. For the simple reason that these short-term loans have interest rates higher than your typical commercial property loans.
Don't worry though, as you'll still find bridge loan lenders charging reasonable rates on offered funding services.
What's important is to ensure you explore all your loan options. This way, you can compare both lenders and offers. Loan comparison, as you know, is key to securing the right funding, whether it's for a home or a business.
5. Your Commercial Bridge Loan Repayment Options
As mentioned above, commercial bridge loans are short-term or temporary loans. This means that they have reduced repayment terms. After all, lenders offer them as a bridge as their borrowers wait for a longer-term funding program.
This said, make sure you check the offered terms on the available commercial loans you encounter. Some come with a term range of between 1 and 12 months. You'll also find lenders offering up to three years of repayment term.
In any case, be sure that you choose a repayment term that best suits your business' finances. You want to make certain you can repay the loan in its entirety come its due date. Not only because it'll cost you a lot more when you default, but also because defaulting can significantly hurt your credit.
6. The Many Other Things You Can Use these Commercial Bridge Loans For
As we've mentioned previously, many business owners opt for bridge financing to purchase a commercial property or have a new one constructed. But these are just two of the many other things you can use this type of commercial loans for.
You can also apply for a bridge loan to work out capital expenditures. For instance, you can use the funds to renovate certain areas of your office building. Or perhaps as a backup for your employees' salary.
You can even use the funds to manage your debt repayments better. Other typical specific purposes include making vendor payments, tax lien payments, or even paying off tax liens in their entirety. Simply put, there are just so many things you can use commercial bridge loans for.
Which is also one of the primary reasons they've become so popular amongst UK business owners.
7. You Can Secure a Bridge Loan Despite Your Bad Credit Score
And this is one more thing that makes bridge loans quite the attractive funding option for many business owners. Since securing a traditional loan becomes almost impossible with poor history or bad credit, a bridge loan offers hope for those who've seen and felt the impacts of mortgage rejection.
This means that, even if you've received denials from regular lenders, you still have hope in getting funding through commercial bridge loan lenders.
Ready to Take the Next Step in Your Business?
As you can see, you don't have to limit yourself to commercial loans that come from banks or credit unions. You have other more ideal options, especially when you need funding right away.
And that's where we come into play. Connect with us now to find out more about our commercial loan offers so you can finally get that expansion or renovation completed!