How To Use Bridging Loans

Recently updated on March 8th, 2023 at 09:51 am

A bridging loan is beneficial when you need to borrow money for a short period of time. It allows quick access to finance for various personal or business purposes. This type of loan is designed to help people bridge their short-term financial gap.

Read this article to learn what a bridging loan is, how a bridging loan works, and its various uses. 

How does a bridging loan work?

As the name implies, bridging loans bridge the gap when financing is unavailable, allowing the borrower to obtain quick cash for a limited time. A bridging loan application is comparatively straightforward compared to a traditional loan.

Where can you use a bridging loan?

Here is a list of some common situations where bridging loans can be utilised: 

• Buying a new house

Bridging loans can be used to secure a new home while waiting to sell the current property. In this scenario, a bridging loan bridges the gap between selling and acquiring the new property. Or in other words, it provides the money to purchase the new property. Then, once you have sold your current property, you can use that money to repay the loan.

• Buying a property at auction

When you secure a bid at an auction, you usually will be required to pay a 10% deposit on the same day, whilst the rest of the amount can be paid afterwards. This is where a bridging loan can be helpful to get access to cash quickly. 

• Purchasing a commercial property

A bridging loan can provide quick access to funds to purchase a commercial property. In particular non-bank, specialist and private lenders are renowned for providing fast, flexible funding – usually with minimal paperwork.

• Business ventures

Businesses often struggle with maintaining smooth cash flow. Bridging loans can be used for various purposes, including working capital, purchasing stock and equipment, for an investment or new business venture. 

• Quirky uses

Bridging loans can be used for all sorts of personal or business requirements – including quirky uses. For example, bridging loans can help with inheritance tax and probate in Australia by providing quick access to funds and flexible financing for beneficiaries during the probate process. Probate is the legal process of distributing a deceased person’s estate, and it can take several months or even years to complete. During this time, beneficiaries may need access to funds to pay for ongoing expenses or to settle inheritance taxes. A bridging loan can allow them to meet their financial obligations whilst the probate process is ongoing. 

Whatever the use, bridging loans are a short-term solution and must have a clear repayment plan and exit strategy. 

Key takeaway

If you are dealing with a cash crunch, you may want to consider a bridging loan. It offers fast access to funds for personal or business needs. The application process is also usually quick and simple – particularly if the bridging loan is from a non-bank, specialist or private lender.

Reach out to Mango Mortgages to discuss your short-term loan needs. We have a team of professionals who are experts in finding financial solutions. Apply online here.

Mango Credit

Yanis Derums is the Founder and Director of Mango Credit– a leading private lender specialising in bridging loans for personal use and business short term loans for commercial and/ or investment purposes. Yanis has extensive experience with financial analysis, credit assessment, product structuring, and general business management