Understanding UK Bridging Finance

Written by Commercial Lifeline


Bridging finance, also referred to as "bridge loans" and "bridging loans", have nothing at all to do with re-constructingrepparttar London Bridge. Bridging finance is typically a short-term loan that a business uses to supply cash for a real estate transaction until permanent financing can be arranged. The word "bridge" conveysrepparttar 112216 fact thatrepparttar 112217 loan is designed to get you over a temporary obstacle. A typical use for a bridge loan is to cover situations such as when a company needs to close on a new office building before having sold their old one. They would userepparttar 112218 proceeds ofrepparttar 112219 bridge loan to continue making payments onrepparttar 112220 old building until it is sold.

Bridging finance almost always requires that you pledge some sort of collateral as security againstrepparttar 112221 loan. You could offer up commercial or private real estate that you own,or are inrepparttar 112222 process of buying, machinery and office equipment or even existing inventory. If you have outstanding business and personal credit, as well as an outstanding relationship with your lender, you might be able to secure your bridge loans on just a signature.

Becauserepparttar 112223 need for bridging finance sometimes arises suddenly and without warning, it is a good idea to establish a relationship with a lender beforerepparttar 112224 actual need arises. When you do this you can arrange to be pre-approved for a specified loan limit. Later, whenrepparttar 112225 need suddenly arises, you won't have to wade through all ofrepparttar 112226 red tape. The typical term for a bridge loan runs from a fortnight to as long as two years. Of course, any terms can be negotiated and a motivated lender will work hard to match your needs.

Understanding a UK Commercial Mortgage

Written by Commercial Lifeline


In many ways a commercial mortgage is just like a residential mortgage in that you pledge real property as collateral against a loan to either buy or refinance that property. You can also receive a commercial re-mortgage and use it as a line of credit for any business purpose. When you use a commercial mortgage to buy property, or to raise funds for any other business purpose,repparttar lender retains an interest in that property untilrepparttar 112215 loan has been paid in full. Unlike other types of business loans, which usually have a relatively short repayment period, you can take out a loan for as long as 30 years if you like.

The lender receives repayment ofrepparttar 112216 commercial mortgage principal and interest overrepparttar 112217 lifetime ofrepparttar 112218 loan. If you default onrepparttar 112219 loan and go into arrears thenrepparttar 112220 lender can foreclose and take possession ofrepparttar 112221 property which was used as collateral.

Generally speaking,repparttar 112222 interest on a commercial mortgage is tax deductible andrepparttar 112223 net proceeds ofrepparttar 112224 loan are not considered to be taxable income. However, you should always check with your accountant to be sure becauserepparttar 112225 tax consequences can be severe should it be determined that your usage ofrepparttar 112226 funds was not for a qualified business purpose.

Should you be seeking a commercial mortgage forrepparttar 112227 purposes of operating your business, rather than actually buying property, thenrepparttar 112228 lender will either want to re-finance your current mortgage, and include enough money to providerepparttar 112229 amount that you are seeking, or they may arrange an equity line where they lend yourepparttar 112230 difference betweenrepparttar 112231 current value of your commercial property andrepparttar 112232 amount that you owe onrepparttar 112233 current mortgage.

There are generally two types of interest schemes available when you are applying for a commercial mortgage.

The fixed rate commercial mortgage establishes an interest rate that is in place either forrepparttar 112234 life ofrepparttar 112235 loan or for a fixed period of time. If it is for a fixed period of time then it will normally convert over torepparttar 112236 second type of rate, which is called a variable interest rate, afterrepparttar 112237 fixed time period expires.

In some cases your lender may add a Early Redemption Charge (ERC) clause to your commercial mortgage contract which states that if you pay offrepparttar 112238 note prior torepparttar 112239 end ofrepparttar 112240 fixed rate period thenrepparttar 112241 lender is entitled to a one-time lump fee to offset their loss of expected income. In some cases this ERC may extend to longer periods possibly up torepparttar 112242 entire term ofrepparttar 112243 loan. Be very sure to read your loan contract carefully to make sure that you understandrepparttar 112244 implications ofrepparttar 112245 ERC if it is present.

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