How the need arises for bridging finance varies is manifold, but as you take out your bridging loan there should be one thing in your mind: Exit Strategy.
Bridging finance is fast money but it can eat into your profits if not used carefully therefore it is best used on a short-term basis. Henley Finance specialises in loans between three and twelve months, getting the property developer the vital funds when they need it but we have noticed that the most profitable projects are the ones where the borrower has a plan from the outset as to the term of the loan.
Often bridging finance is used from the very start of the project and used up to the point of sale. Bridging finance comes in very useful here if it is a short-term project or if more traditional lenders aren't willing to finance it. Keeping your eye on the sale is the all-important thing. Have a detailed plan for all the funds involved and set dates to reach targets by. Get in a dialogue with local estate agents early. They have a lot of knowledge about the local market and what buyers are looking for and they may even find you a buyer before you instruct them.
For medium to long-term projects - one year and above - refinancing is the recommended exit strategy. You have used bridging finance, maybe to purchase the property because you needed the cash quickly or maybe you have used it to make the property mortgagable. Sometimes bridging finance is required even when your project is financed. The time between drawing down the next tranche can be longer than anticipated and the work has to carry on.
Either way, prudent use of bridging finance can be a valuable part of your business plan, a short-term silent partner. But having the exit strategy in the forefront of your mind is the key. Getting you to your next project is what we enjoy the most at Henley Finance. That is why so many of our clients keep coming back to us. At Henley Finance we have a selection of brokers around us - and our own experience - that can help plan this crucial part of the project and help you keep it under control.
For more information about myself, Richard Butler Creagh from Henley Finance, visit the website. You can also connect with me on the Richard Butler-Creagh Crunchbase page or join the Richard Butler-Creagh professional network on Linkedin.