Bridging Finance
Bridging Loans
Short term finance to cover any
gaps in funding.
At Word On The Street we offer bridging loans that can be used to cover a gap in funding until a longer-term solution is available. It can be used by individuals or businesses.
Unlike mortgages, bridging loans can be arranged quickly.
Speak to one of our Bridging Finance Experts today to see
how we can help with your short term finance needs.
Types of Bridge Financing
Bridge financing is an interim financing option used by companies and other entities to solidify their short-term position until a long-term financing option can be arranged.
There are four types of bridge loans, namely: open bridging loan, closed bridging loan, first charge bridging loan, and second charge bridging loan.
First Charge Bridging
A first charge bridging loan gives the lender a first charge over the property. If there is a default, the first charge bridge loan lender will receive its money first.
Second Charge Bridging
For a second charge bridging loan, the lender takes the second charge after the existing first charge lender. These loans are only for a small period.
Debt Bridge Financing
One option with bridge financing is for a company to take out a short-term, high-interest loan, known as a bridge loan.
Equity Bridge Financing
Sometimes companies do not want to incur debt with high interest. If this is the case, they can seek out venture capital firms to provide a bridge financing.
Advantage of
Bridging Finance
Bridge financing can give companies a much-needed short-term cash injection to temporarily cover the costs of
running the business or get the wheels rolling on an important investment or project. If there’s no alternative or the payoff promises to be greater than the cost, it can be a worthwhile option to pursue.
Disadvantage of
Bridging Finance
The biggest risk of bridge financing is digging into a deeper hole. These loans tend to come at a high cost and need to be paid back quickly. Equity bridge financing is often expensive, too, and can involve giving up shares at a big discount.
Is a bridging loan the right choice for me?
Bridge financing offers a temporary injection of capital to keep an entity covered and able to meet its needs until it receives an infusion of cash or regular, long-term financing.
These arrangements are short-term in nature, tend to be expensive, and are often used to cover things like short-term working capital needs and IPO expenses. Bridge financing can come in various forms including debt, which involves getting a bridge loan, and equity, which involves receiving cash in exchange for shares of ownership in the company.