Bridge Loans or Bridge Financing
Bridge financing is a method of financing, used to maintain liquidity while waiting for an anticipated and reasonably expected inflow of cash. Bridge financing is commonly used when the cash flow from a sale of an asset is expected after the cash outlay for the purchase of an asset. For example, when selling a house, the owner may not receive the cash for 90 days, but has already purchased a new home and must pay for it in 30 days. Bridge financing covers the 60-day gap in cash flows.
Another type of bridge financing is used by companies before their initial public offering, to obtain necessary cash for the maintenance of operations. These funds are usually supplied by the investment bank underwriting the new issue. As payment, the company acquiring the bridge financing will give a number of stock at a discount of the issue price to the underwriters that equally offset the loan. This financing is, in essence, a forwarded payment for the future sales of the new issue.
Bridge financing may also be provided by banks underwriting an offering of bonds. If the banks are unsuccessful in selling a company’s bonds to qualified institutional buyers, they are typically required to buy the bonds from the issuing company themselves, on terms much less favorable than if they had been successful in finding institutional buyers and acting as pure intermediaries.
There are two types of bridging finance. Closed bridging and Open Bridging.
Closed bridging finance is where you have a date for the exit of the bridging finance and are sure that the bridging finance can be repaid on that date. This is less risky for the lender and thus the interest rate charged is lower.
Open bridging is a higher risk for the lender. This is where the borrower does not have an exact date for the bridging finance exit and may be looking for a buyer of the property or land.
Bridge loans are gaining in popularity. When a home buyer is buying another home before selling an existing home, two common ways to find the down payment for the move-up home is through financing either a bridge loan or a home equity loan (or home equity line of credit).
Generally, a home equity loan is less expensive, but bridge loans contain more benefits for some borrowers. In addition, many lenders will not lend on a home equity loan if the home is on the market. Smart borrowers will compare the benefits between the two loans to determine which is a better fit for their particular situation and plan ahead before making an offer to purchase another home.
In today’s dynamic business landscape, organizations often encounter situations where they require immediate capital to seize lucrative opportunities, navigate unforeseen challenges, or bridge financial gaps during crucial transitions. This is where Clearlease Financial Group’s Bridge Financing and Bridge Lending services come into play. In this guide, we will explore the key aspects of Clearlease Financial’s bridge financing solutions, including their benefits, application process, and eligibility criteria, providing you with a clear understanding of how these services can support your financial needs.
- Understanding Bridge Financing:
Bridge financing refers to short-term funding that serves as a bridge between the immediate need for capital and a long-term financing solution. Clearlease Financial Group offers bridge financing options designed to provide quick access to funds, enabling businesses to address urgent financial requirements efficiently. Whether it’s funding a time-sensitive project, managing cash flow gaps, or seizing investment opportunities, bridge financing can be a valuable tool in your financial toolkit.
- Benefits of Clearlease Financial Bridge Financing:
Clearlease Financial’s bridge financing solutions offer several benefits that make them an attractive option for businesses:
a. Speed and Flexibility: Clearlease Financial understands the importance of timely financial support. Bridge financing is designed to provide quick access to funds, allowing businesses to capitalize on opportunities without delays. Moreover, these solutions are flexible, accommodating unique financial needs and repayment structures.
b. Customized Solutions: Clearlease Financial tailors bridge financing options to suit individual business requirements. They work closely with clients to understand their specific needs, ensuring that the financing solution aligns with their goals and circumstances.
c. Seamless Transition: Bridge financing is designed to smoothly bridge the gap between two financial milestones, such as the sale of an asset or the approval of long-term financing. This helps businesses maintain their operations, pursue growth strategies, or complete projects without disruptions.
- Clearlease Financial’s Bridge Lending Solutions:
In addition to bridge financing, Clearlease Financial Group also offers bridge lending services. Bridge lending involves the provision of short-term loans secured by collateral, allowing businesses to access immediate capital while waiting for more permanent financing options. Clearlease Financial’s bridge lending services provide an alternative source of funding, helping businesses secure the required capital quickly and efficiently.
- The Application Process:
Clearlease Financial has streamlined the bridge financing and bridge lending application process to make it convenient for businesses:
a. Initial Consultation: The process begins with an initial consultation where Clearlease Financial’s experienced professionals assess your financial needs and discuss the available options.
b. Documentation: Once the suitable solution is identified, the next step involves gathering and submitting the required documentation. This may include financial statements, collateral details, and other relevant information.
c. Evaluation and Approval: Clearlease Financial evaluates the application, considering factors such as business financials, creditworthiness, and collateral value. Upon approval, the funds are disbursed swiftly, enabling businesses to address their immediate financial requirements.
- Eligibility Criteria:
Clearlease Financial has a broad eligibility criterion for bridge financing and bridge lending solutions. While specific requirements may vary based on individual circumstances, common factors include the borrower’s creditworthiness, the value and marketability of collateral, and the purpose of the funding.
Clearlease Financial Group’s bridge financing and bridge lending solutions provide businesses with a valuable lifeline during critical financial junctures. These services offer speed, flexibility, and customized solutions, enabling businesses to access immediate capital and bridge financial gaps seamlessly. By understanding the benefits, application process, and eligibility criteria outlined in this guide, you are now equipped to explore Clearlease Financial’s bridge financing options and make informed decisions that support your organization’s financial goals.
A bridge loan is often obtained by developers to carry out a project while permit approval is sought. Because there is no guarantee the project will happen, the loan might be at a high-interest rate and from a specialized lending source that will accept the risk. Once the project is fully entitled, it becomes eligible for loans from more conventional sources that are at a lower interest, for a longer term, and in a greater amount. A construction loan would then be obtained to take out the bridge loan and fund the completion of the project.
A consumer is purchasing a new residence and plans to make a down payment with the proceeds from the sale of a currently owned home. The currently owned home will not close until after the close of the new residence. A bridge loan allows the buyer to take equity out of the current home and use it as a down payment on the new residence, with the expectation that the current home will close within a short time frame and the bridge loan will be repaid.
A bridging loan can be used by a business to ensure continued smooth operation during a time when for example one senior partner wishes to leave whilst another wishes to continue the business. The bridging loan could be made based on the value of the company premises allowing funds to be raised via other sources for example a management buy-in.
A property may be offered at a discount if the purchaser can complete it quickly with the discount offsetting the costs of the short-term bridging loan used to complete it. In auction property purchases where the purchaser has only 14–28 days to complete long-term lending such as a buy-to-let mortgage may not be viable in that time frame whereas a bridging loan would be.
BRIDGE LOAN – Prior to completing an IPO or M&A transaction, a company quite often needs to bolster its cash balance for strategic reasons, including improving its negotiating position at the bargaining table. A bridge loan enables management to quickly access needed capital while minimizing dilution and takes into account the complex issues related to either kind of transaction.
|*||Ideal to bridge IPO or M&A transactions|
|*||Strategic short-term liquidity|
|*||Quick access to capital|