What is Bridging Finance?
Bridging finance is a type of loan that bridges your cash flow when a large transaction is pending. You can use the surety of that transaction being completed as a method of unlocking a portion of the cash tied up in that transaction.
There are many different types of bridging finance.
Property Bridging Finance
You have successfully sold a property and awaiting the deal to pull through but your cash flows cannot wait for the transaction to be concluded. In a nutshell you are borrowing against a sold asset.
Lenders offer up to 75% advance on the value of the sold property after deducting bond and all transfer costs. The proceeds can be used for working capital, deposit on the next property etc.
The loan would be settled when the sold asset has is transferred to the buyer.
If your business gets paid commission for the work that it does, but that commission only arrives late, or well after the work has been completed, then commission bridging may be useful for you.
The lender is able to see that you are due to be paid your commission, and they then issue you funding on the back of that assumption.
Debtors Book Finance
If you have a large debtors book where you have a number of outstanding payments that are due to you, you may be able to get short term bridging finance against those outstanding accounts.
The likelihood of this will depend on what type of accounts are outstanding and the amounts.
If you have won a contract and are needing finance to deliver on it, you may be able to access a specific type of contract-based bridging finance that uses the contract amount as a form of security.