Voltaire Financial | Property Finance

Bridging Finance: An introduction to some of its common uses

15/10/2013 | by Andrew Hosford

Andrew Hosford - Head of Bridging, Voltaire BridgingThe bridging industry has evolved almost out of recognition since the downturn and now represents an extremely useful tool for certain types of real estate finance requirements. However the availability, and cost, of bridging finance has always been subject to a number of key factors:
  • Location of property
  • Quantum of loan required
  • Loan required as a ratio of market value
  • Borrower background and track record

One of the key changes has been the expansion of the types of bridging loan available and the corresponding uses for these short term offerings. For my second blog entry I therefore thought it would be useful to provide an overview of bridging, the more common types of bridging product at this point in time and the trends surrounding their level of demand.

Bridging Finance

Voltaire Bridging Definition: 'A short-term loan where the lender's primary scrutiny is focused upon the underlying real estate asset and where the lender is secured via a first legal charge against the property.'

The term of a bridging loan can extend up to 24 months but is typically fewer than 12 months.

The primary benefit of bridging finance is the speed at which a facility can be put in place. Where high street banking loans can take as long as 4-6 months to draw down, bridging facilities can be put in place in under a week. Particularly for those property professionals looking to carry out acquisitions in Central London (due in large part to competition from owner-occupiers who are often cash buyers) the ability to move quickly can be the difference between successfully securing a property or not.

Closed Bridge

Voltaire ridging Definition: 'A bridging loan with a guaranteed exit in place thereby guaranteeing the lender will be repaid at maturity.'

The guaranteed exit via sale or refinance typically allows the lender to price the facility more attractively.

Traditional Bridge

Voltaire Bridging Definition: 'A facility which bridges the gap between the completion on a new property purchase and the sale of one's existing property.'

Previously the sole use for bridging finance much of the focus of the industry has subsequently travelled elsewhere but this remains an often necessary product.

Second Charge Bridge

Voltaire Bridging Definition: 'A short-term loan which is secured via a second ranking legal charge against the property.'

Second charge bridges are most often utilised to provide additional security for the lender in order to balance their overall exposure at an acceptable level.

What can Voltaire Bridging do Differently with even these more common types of bridging finance? Our primary strength is our ability to tap into more unusual sources of funding which others simply cannot. We have strong relationships with all the mainstream bridging lenders who are often highly competitive and an extremely useful source of funding. Often however Voltaire Bridging will utilise our ability to access a more flexible or cost-effective solution by taking advantage of unique access to family offices, specialist bridging financiers, high net worth individuals, private banks and other unique pots.

Next time I will be focussing more on Voltaire Bridging itself and the reasoning for our "Defining Different" theme. I shall also be discussing some of the bespoke products we are working on currently. Meanwhile If you wish to discuss a bridging requirement on your own behalf or on behalf of your client I look forward to hearing from you on 0207 182 1740 or via email at andrew@voltairebridging.com

 

 

© 2015 Voltaire Bridging - "Defining Different"

Voltaire Bridging - a member of the Assocation of Bridging Professionals.