Short Term Bridging Finance

In Australia, bridging finance is used in connection with transitional or temporary funding. As the term implies, this is a special type of alternative financing which bridges a cash flow ?gap, and usually it is designated for urgent need funding. Funds are only provided until a permanent solution can be found. In some situations, there are extenuating circumstances that make it necessary to obtain temporary financing, such as expediting the closing of a real estate transaction.

One way to understand bridge loan financing is to associate it with specialized lending. This makes it easier to understand the differences between bridging loans and regular commercial financing. The main difference is that bridge loans have higher interest rates and shorter repayment terms; the industry standard is usually 1 to 12 months.

Another occasion for short term finance is funding for a home. In certain instances, individual homeowners may need to ?bridge the gap? between renting and purchasing a new home. Some homeowners may qualify for a non-interest bearing bridging reprieve. This means that they aren?t required to make a payment during a pre-determined time period.

A good example of this would be obtaining bridge funding to complete a real estate transaction for a new home purchase before the old one sells. This can help to alleviate the financial strain of maintaining two mortgages. Although, bridging financing is considered a viable option for non-business purposes, most homeowners will not meet the income requirements to qualify for two mortgages.

Bridge loans can also help investors who wish to capitalize on foreclosed properties. When it comes to purchasing commercial properties, the terms are standardized and the qualifying process is straightforward. Most loans involving investors obtaining real properties are completed within 72 hours.

Typically borrowers must have the demonstrated ability to repay the loan and assets are required for collateral. Qualifying criterion varies from lender to lender, but the funds are available as interest only loans. This means that bridging finance is different from standard home loans, where monthly payments are divided between the interest and principal. With bridging loans in Australia, interest isn?t charged on the loan until the installment payment is remitted.

Funding for bridge loans are most often provided by private lenders. These lenders are referred to as, bridge loan funding investors. Funding is available for business or business entities that require specialized funding structures. Loans of this type can also be obtained from commercial lenders.

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