AWhen it comes to raising funds by virtue of credit, people have two main options and this is based on the factor of time namely long term and short term financing. One of the more common and widely used form of the latter includes what we call commercial bridging finance.
Providing what people refer to as bridge loans, it is a type of interim financing arrangement that allows borrowers to attain short term funds to fulfill their short term liquidity needs by connecting a need coming due and one’s bigger and permanent source of funds.
But despite of its widespread use, several myths continue to haunt commercial bridging finance so we took it upon ourselves to go bust these misconceptions. After all, how will people realize the benefits it can bring if they are filled with lies that fuel their misunderstanding about the service? To keep our facts straight, here take a look.
“They pile more debts.”
Although a type of loan, it’s not safe to assume that they’re just another liability. They’re unlike any other as they are a type of interim finance. Eventually, they will be closed by one’s main funding source the moment it becomes available. Because they are temporary and short term in nature with a period of often between two weeks to three years, it becomes less burdensome.
“They’re only meant for commercial asset acquisitions.”
Commercial bridging finance is specifically designed and catered for investors and entrepreneurs who wish to buy assets for office and business purposes. However, bridging loans in general can be used for an array of different purposes.
“They are financially hefty.”
A loan, regardless of type and size is a legal and binding obligation. But that doesn’t mean that they are all burdensome. Others may be but there are those that prove useful and beneficial instead of a burden just like bridge loans. They do come with interests but what makes them a delight to use lies in their short term and temporary nature. After computation, they prove to be cheaper since the interest rate is applied to a lesser number of months or periodic intervals.
“Paying them is difficult and meticulous.”
This is the most outrageous and silly of misconceptions about commercial bridging finance. Flexibility comes with these loans in terms of repayment. Borrowers have the option to pay it out before maturity as early as they can and want to or at maturity once permanent funding has been released and made available.
More at Alternativebridging.co.uk.