When it comes to choosing a type of financing, one has to carefully screen and scrutinize each option to determine which one best complements one’s needs and which is a better fit for a certain scenario. We can’t just pick in random or else we’d be in trouble for sure. That said we’re here to help you understand said options better starting off with bridging loans.
Now to most people, the term bridging loans may sound a little foreign or new. They’ve been around for a while now but not many are aware of the possibilities and opportunities they bring. To begin with, they are a type of interim financing that provides for a temporary borrowing to fulfill short term liquidity needs. In other words, bridging loans are taken out pending the arrangement of a long term and often bigger fun line such as but are not limited to bank loans, mortgages, proceeds from sale and salary to name a few.
They are taken out in order to provide for pre-purchase costs or requirements that are necessary for the fulfillment of a particular transaction, for instance the acquisition of equipment or real estate. The most common examples would be down payment, security deposit, research costs and professional fees. Sometimes a bridge may also be utilized to pay for the first few initial installments of a purchase.
What’s great about this interim financing option is that it is not only faster to process but it is also nonrestrictive in nature. This means that providers, at least a good majority of them, allow users or borrowers to utilize and allocate the funds from the bridging loan in whichever way they deem fit. Users get the liberty when it comes to the budget and the use of such resources.
Moreover, its short term nature allows for its effectivity because the period, often between two weeks to three years at most, allows leaser risks and strain when we talk about the burden of payment. Most providers and forms of bridging loans also allow users to choose between two payment options. The first is where borrowers get to pay off the bridge prior to its maturity thus saving up on interest costs while the second allows payment at maturity date which is likewise the time by which one’s long term financing or source of funds has come through and shall therefore be used in part to close the interim loan.
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