Closed Bridging Loan

Closed Bridging Loans – Bridging Finance You Can Count on

Every new business move – from investment to property acquisition – comes with its price tag. While businesses try to make moves that will make them more profits in the long run, the short run is almost always about spending.

For a number of reasons, a business move can get stalled if the capital isn’t available. A well-structured bridging loan can be just the helping hand your business needs in such situations.

What is a Closed Bridging Loan?

A closed bridging loan is a bridging loan which contractually stipulates a clearly defined repayment date.

The following factors usually typify a closed bridging loan:

• As it is a type of bridging finance, a closed bridging loan is usually a short-term mortgage. Typical tenures for closed bridging finance packages can run up to 12 months.
• Every closed bridging loan has a pre-defined repayment date. This date is a result of negotiations between the borrower and the lender.
• The lenders bear relatively lower risk when they enter such contracts due to the fixed repayment date.

Why do Businesses Go for a Closed Bridging Loan?

A closed bridging loan can be an ideal way of borrowing for businesses if they can set a fixed repayment date. An example can better explain this idea.

Example

Let’s say that a business wishes to acquire a prime piece of land. As the property in question is expensive, the business has to look for suitable borrowing options to partially cover the expenses involved.
The business decides to arrange for the sale of another property they already own to finance this acquisition. However, the sale of existing property takes longer than anticipated. As the business eventually finds a buyer, they get to know that the said buyer can only effect the contract at the end of the following quarter. To ‘set the deal in stone’, a contract is drawn with a fixed sale date.

The business can now approach lenders for a closed bridging loan with the repayment date set to coincide with the sale date of the existing property.

How does Closed Bridging Finance Work?

The ins and outs of closed bridging finance aren’t much different from those of a generic bridging loan. You can visit this page to read in greater details how bridging finance really works.

A closed bridging loan is structured around the surety of capital being available to the borrower by a fixed date in the near future. Because sale contracts or mortgage agreements usually go through without much trouble, it’s easier to find suitable lenders for a closed bridging loan.

Closed Bridging Finance – Affordable as well as Accessible

Having a fixed exit strategy in place gives the lenders enough confidence about the repayment potential of the borrower. So, unlike open bridging loans, a closed bridging loan is structured around the exit date.
As the lender assumes lower risk here, closed bridging finance packages also carry lower interest rates.