Bridging Finance

[StuartQ]

Have been in business for app 20 years.
We have been presented with a very exciting opportunity. A very well established children’s day nursery (freehold) has been offered to us. We will be new to the industry however have worked alongside for 20 years.
We have completed due diligence, valuation and are satisfied.

As we are new to the market, finance is proving challenging. We are putting up app 42% deposit on complete deal.

We have been in offered bridging finance which would get the deal over the line. We could then refinance in year 2 when we have more experience in the market.

What are thoughts on this type of finance, does anyone have experience?

Thanks.

 

[Mark T Jones]

What are you actually looking for?

The right/best type of funding is dictated by your own business criteria, not by random opinions - and certainly not by APRs.

 

[Gordon - Commercial Finance]

Bridging finance can save the day, or it can sink the ship.

Which is applicable here is dependent on your own individual circumstances...

 

[Marcus A. Wright]

Difficult to answer really, if bridging finance really is the only option then its up to you to weigh up the costs vs benefits. Does the business comfortably afford the monthly servicing of the loan?

Also what efforts have you put into sourcing a commercial term loan? Have you just approached high street banks or have you looked at the "whole" market. There may be specialist lenders that will consider you lack of industry experience, especially if there is existing management in place.

Plus you need to consider how you might exit the Bridging loan if the refinance does not materialise.

 

[Ned Barker]

Bridging finance is a great option, if you want to get access to cash fast. They can be arranged incredibly quickly, and they usually don't require very many information checks, like lending history and credit scores.

But because they are short term, they are expensive. They can have fees of 0.5-1.5% per month, which is more expensive than a normal mortgage. So you want to make sure you only take one if you are confident that you won't need it for a long period of time!