Bridging Loan Purposes

Wednesday 4th January 2023 | 1 minute read

The bridging loan purpose is the reason why the loan was taken out in the first place.

And whilst bridging loans tend to finance a property purchase, they can be utilised for almost any purpose.

Photo of kitchen refurbishment before and after comparison

What is a Bridging Loan?

Bridging loans can be used in the real estate market to cover the purchase of a new property before the sale of an existing property. This 'buy before you sell' finance was the original purpose of bridging loans and after reviewing the history of bridging loans it can be traced back to the late 1960's.

Nowadays, the humble bridging loan has evolved to become a versatile fast financing tool.

Bridging finance is available for both individuals and businesses and is usually secured against an asset, such as a property or other high-value asset, until the long-term finance is obtained.

Loan Purpose of Bridging Loans

The loan purpose of a bridging loan is to provide short-term, secured financing for large, urgent expenses. Common uses of these loans are:

  • Financing the purchase of a new property or business.
  • Financing a renovation project prior to obtaining a mortgage or other long-term financing.
  • Covering the costs of necessary equipment repairs or upgrades.
  • Covering the costs of taxes or other urgent short-term debts.
  • Covering the costs of legal fees for a transaction until it is funded.
  • Paying for the settlement of an estate.
  • Financing a move or relocation.
  • Helping to secure working capital for your business.

Additional uses include bridging finance for business related activities such as financing management buy outs.

Final thoughts

Bridging loans are a specialised form of short-term financing that can help bridge the financial gap when long-term financing is not available. By understanding the loan purpose of bridging finance, you can access these powerful funds when you need it most.

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