If you’re planning to invest in a new office space or any commercial asset for that matter, you’re bound to come across Commercial bridging finance one way or another. If it’s your first time hearing about it, don’t fret. We’re here to help you get to know more about it and hopefully guide you in deciding whether or not it’s your perfect match.
Commercial bridging finance by definition is a temporary interim financing method used in the acquisition of commercial properties. It’s been dubbed as a “bridge” because just like the structure, it helps connect and join the gap between two transactions: the purchase and the main source of cash.
When we talk about properties, we can’t help but also talk about their values. They obviously do not come cheap. Their worth comes in several digits and it’s no easy feat trying to pool enough resources to invest in one. Most people would finance them by virtue of their savings, a mortgage, income, a bank loan, retained earnings or a sale of a big ticket item such as a fixed asset (e.g. an old office building that could no longer house one’s growing operations or a property in one’s portfolio that you’re willing to trade away for a better investment).
The only downfall with the aforementioned cash sources is that they take time. Savings, income and retained earnings will need months or even years before they get to a desired level. Credit such as mortgages and bank loans need time to process and we know how long these things tend to get. Sale proceeds of an asset sale on the other hand have no definite timing. You’re never sure when a buyer shows up.
All of that creates risks. You see, investing in commercial properties or any real estate asset for that matter will always demand and require resources on top of and before the actual price tag of the property. These short term liquidity needs are required to process the acquisition. Take note that research costs are expenses. There are also survey costs that are compulsory to ensure vital information about the asset are valid and know for decision purposes. And then there’s the security deposit and the down payment.
Commercial bridging finance provides the cash needed for that thereby eliminating time constraints and opportunity losses. It covers said short term needs and is eventually closed by one’s permanent financing as soon as it arrives.
The art of real estate is something that a lot of people want to master. This ain’t surprising too considering the fact that this type of investment can rake up heavenly returns, of course when done right. And even if one’s aim is to acquire for personal use, it never hurts to learn a thing or two about it. This way, one makes better decisions and makes every cent count. With that said, we’ve tapped Alternative Bridging for their advice regarding the subject and behold the tips and reminders they so willingly shared.
Know the seller. This extends beyond names and niceties. Really get to know about the agent, the owners or the firm selling the property because buying something as significantly valued as a real estate asset requires trust. Don’t hesitate to ask for identifications, make various questions or even ask around from the neighbors.
Verify the legal documents. Do this especially with the property’s title. You have to make sure that the person selling it has the right to do so. Ownership must be authenticated to ensure that no claims will hound you later. Asking from the owners won’t cut it alone. Obtain a certified true copy of the title from the Register of Deeds and compare the two. Also, ask to see original tax receipts to ensure that annual real property taxes have been paid.
Check for any liens or encumbrances. Who in their right mind would invest in an asset that currently has claims against it? There’s too much risk in that. To avoid from suffering from this plight, check the back portion of the Transfer Certificate of Title. It should contain annotations if there are current liens or encumbrances against the asset.
Visit and have it surveyed. Hire a chartered property surveyor to examine the asset. This shall help especially in terms of validating the information that the seller has laid out. Moreover, it shall also bring into play aspects that may have not been disclosed. This shall also help discover important details such as current market value, remaining useful life, ongoing costs, structural integrity, asset condition and more.
Canvass before you buy. Alternative Bridging highly stresses to buyers that there has to be adequate amount of comparison and research to truly make a great investment. Although time is of great importance here, one can save costs and avoid mismatched purchases by comparing and weighing options first.
Commercial bridging finance has got to be a superhero for many investors out there. We all know that buying and funding for real estate acquisitions are no easy matter but this method makes the chore run down a little smoother. How you may ask? Well, read on to find out.
How do investors fund for their commercial property purchases? If you think about it, there are quite a good number of options out there which may be used as a standalone fund. They may even be combined with others to pool a larger amount of resource. Let’s start to name a few:
Savings – This simply refers to funds that one has set aside for future use, regardless if such use has already been set or not at the time of allocation.
Retained Earnings – This is the portion of net income that has been set aside by a business entity for a specific use.
Income Sources – The amount of money received over a period of time as payment for work done, can come from various sources. There is salary for one, income from business as well as investments.
Mortgages – Defined, a mortgage is an amount of money owed from a lender with the use of the property as security or collateral.
Bank Loan – This is a sum of money loaned at an interest from a bank for a particular period of time and is often backed by a form of security.
Proceeds of a Sale – Acquisitions may also be funded by selling a currently owned asset, a property or a car for example.
All of the aforementioned sources are viable and they are widely used. The problem is, all of them rely heavily on the factor of time. In other words, they need a certain time period before they are made available or at least enough for the investment. Savings, retained earnings and income sources need time to pool up. Mortgages and bank loans take time particularly in the application and approval process. As for proceeds of a sale, a buyer’s presence is never predicted for sure.
Where does commercial bridging finance fall in the equation then? If you think about it, there is more to buying an asset than simply the selling price. Initial costs in particular will have to be part of the budget. These are costs necessary to make the acquisition happen. For example we have, security deposits and down payments. The bridge is a short term loan that provides for such immediate needs while one’s permanent funding is still on its way. To explain it simply, the commercial bridge loan acts as an interim financing.
When going for a property investment or asset purchase, a lot of time and attention is allocated to tasks before and during the transaction. What many fail to remember is to provide adequate effort for post acquisitions too. They are equally as crucial and will need tending to as well otherwise the investment won’t be as fruitful as expected or hoped for. This is why today, we have come up with the following list of things to do after an asset acquisition.
·Double check on the documents. We’re expecting that you’ve made your fair share of validating with the legal documents related to the purchase but it doesn’t hurt to look again; now would it?
·Keep payments on schedule. This is especially true if the acquisition was funded with the help of a certain type of credit financing, both short and long term. Never slack off on your obligations unless you’d want to suffer the consequences, rising interests and foreclosures being two. Load them up on your calendar to avoid missing them.
·Update the space. Surely, you’d want to make the property suit its intended purpose whatever that may be. It’s far easier to fix, repair and improve whatever has to be worked on prior to the move and before all your stuff are hauled into the space.
·Change up the security system. Even if the previous owners swear with all their hearts and even if they are trustworthy enough, it is always best to change up all the locks, codes and other similar security measures within the property. This is to ensure that no one else gets access into the asset unbeknownst to its new owners. You never know who may have gotten hold of the security combination or a spare key prior to your purchase. It’s better to be safe than sorry.
·Acquaint yourself with the area. Even if you’ve already scouted the property prior to the purchase, it’s still worth knowing what it holds. A neighborhood or city has its own secrets and charms that you won’t get to know in one or five sweeps. Find out the best ways to get to town or a particular area. Check out the roads and street details. Find out which establishments are within easy reach and which aren’t.
With the rise of many businesses from small scale to medium enterprise to humongous conglomerates, the need for better financing has also taken a hike. One of the few most popular and effective options that came out was that of bridging loans. Unfortunately for many, the sound of them is still a little new if not totally alien so today we’ll talk about them and the benefits they bring.
Bridging loans by definition is an interim financing arrangement that provides a short term loan. It is designed to provide for temporary or short term funds until a permanent source or form can be obtained or made available. They are popularly used whenever sources such as bank loans, mortgages, sale proceeds or income do not arrive on time but a need has to be fulfilled. Upon the arrival of one’s permanent funding, the bridge shall then be closed with it.
The use of such mode of finance comes with a number of benefits to boot such as but is not limited to the following.
1. It is strictly short term. – We all know that the longer the loan is the more chances for borrowers to be burdened by it. Its short term nature allows for lesser fees to worry about and lesser months to pay off.
2. It is easy to acquire. – What makes it a great form of interim finance is the fact that they are easier and faster to process than others of its kind as well as the more traditional forms of credit. The funds can be made available in mere days or weeks even for some providers.
3. It saves you a lot of time. – You no longer need to wait for your loan’s approval and release before you get to acquire that new office building. You can use the bridge to pay up the upfront costs such as the down payment, move in and go on with operations. In business, we all know that time is of the essence so the faster things are done then the better.
4. It cuts risks as well. – Companies no longer have to worry about failing to come up with funds to seal the deal on a prime asset. It need not anymore suffer from opportunity losses.
5. It allows for liberty of payment. – Bridging loans allow borrowers to choose when to pay and close it. You can do it before maturity and as early as you are capable of or at maturity date, upon availability of your permanent financing means. Learn more about here www.alternativebridging.co.uk.
When you take out a form of credit, one of your most crucial tasks is to research and understand your options to better choose and make the most out of your choice. Two of the most popular forms of credit would have to be the traditional bank loans and bridging loans. It is however important to keep in mind that these two are different. As a matter of fact, they belong to either ends of a pole. So how exactly do they differ? Are they even alike? Find out by reading on below.
As per definition…
Traditional Bank Loan – This pertains to the most common type of credit for both businesses and individuals. It is the amount of money lent at an interest by a bank to a borrower for a certain period of time, oftentimes under a collateral security however unsecured agreements may also be available depending on the borrower’s creditworthiness.
Bridging Loans – It is a form of borrowing where a certain sum is lent and issued to a borrower to be used to cover an interval between two transactions. It is uses until either permanent financing is secured or an existing obligation is taken out.
As per period of time…
Traditional Bank Loans – This type of credit is for the long run and its use is often aimed for long term purposes rather than otherwise. This is why the payment for such type of credit or third party financing will also spread out for much longer, usually a couple of years, depending on the terms agreed upon by both borrower and lender.
Bridging Loans – Because bridge loans are designed as an interim financing and a stop gap measure, it is directed to fulfill and provide for short term needs in contrast to the above. It’s payment will be spread out from a few months to a much shorter number of years, again depending on the agreement signed by both parties.
As per paperwork and application…
Traditional Bank Loans – Taking out a loan from a bank and similar other financial providers is considered more meticulous and tiresome. A lot of paperwork and documentation will have to be filed such as but are not limited to application forms, tax credentials, corporate books and financial reports, credit history and more. Moreover, the time from application to approval can be pretty lengthy.
Bridging Loans – Although less of a hassle, there are still documentary requirements needed when applying for bridging loans albeit not as much as traditional credit from banks and similar providers. Furthermore, approval rates are higher and are released much faster.