Are There Alternatives to Bridging Loans? – Exploring Short Term Finance

– Article updated on 27/01/2024 –

The simply answer is yes, there are alternatives to bridging loans that may suit your goals and aspirations more. However, there is a reason why bridging finance is so popular, so make sure you explore your alternatives in depth before making a decision.

Bridging Loan Alternatives

There are three core alternatives to bridging loans, they include the following:

1. Refurbishment loans
2. Asset finance
3. Invoice factoring

1. Refurbishment Loans

A doer-upper can be picked up at a bargain price and prove a great investment for anyone with the skills and resources to upgrade the property. Many people will utilise a bridge to secure the property and renovate it, before refinancing onto a buy-to-let mortgage or selling a few months later. However, bridging loans alternatives such as a refurbishment loan could help.

Refurbishment finance is designed with renovation in mind. Therefore, you can design a finance deal that reflects the level of works to be done. Lending can be based on the end value of the property when completed, meaning 100% funding for build and professional costs is available.

However, applying for a refurbishment loan requires a lot more paperwork and takes longer to secure as a result. Therefore, if you need funds fast, a bridge may be better suited.

Highly versatile and malleable but can take longer than bridging finance, refurbishment finance is work considering.

2. Asset Finance

A common use of bridging loans is to boost working capital when cashflow is low. However, if you’re looking to purchase tools, machinery, product or office furniture and tech, you could be suitable for asset finance.

Asset finance allows a business to make purchase payments in installments or to release cash from existing assets by selling them to a finance provider and agreeing to lease them back instead.

The key unique benefits of asset finance include but are not limited to the follow:

• Can be arranged fairly quickly
• Allows you to offset payments against pre-text profits
• Likely to be cheaper than bridging loans

However, the full value of the asset cannot be offset and long term it can prove expensive. So, we implore you to be realistic about the value you require and for how long when deciding between asset finance and a bridging loan.

If you want to find out how expensive asset finance could be for your project, we highly advise consulting an experienced property finance broker.

Though it can be arranged fairly quickly, asset finance can end up more expensive and complicated than you first thought.

3. Invoice Factoring

Again, if cashflow is down, you could apply for a bridging loan. However, if this drop in funds is due to owed fees, invoice factoring could help.

This will involve an invoice finance agreement where you sell your accounts receivable to a third-party factoring company. This organisation will give you an upfront payment and inherit the responsibility of chasing owed payments. However, please be aware, the purchase price will likely be lower than the amount owed.

Invoice factoring is a lower risk option

Invoice factoring is lower risk than a bridging loan, no collateral is needed, and it avoids increasing any debt owed. However, invoice factoring can be quite expensive, so it is important to run the numbers and compare the cost to a bridging loan’s interest to see which makes more financial sense for you and your business.

Invoice factoring can be very attractive due to it’s lower risk nature, however it can end up more expensive down the line.

Need Help Deciding Which Finance Option Would Suit You Best?

If you require funding, but aren’t sure which type would suit you best, get in touch with our friendly and knowledgeable team. Our brokers will be able to talk through your specific requirements and outline the funding options available to you.

At Pure Property Finance, our experienced finance brokers have built up strong relationships with lenders, meaning we have the knowledge to match you up with the lender that best suits your financial needs.

We’re known for our expertise in arranging property finance deals, plus, we’ve access to broker-only deals which aren’t available on the high-street.

So, if you’re looking for bridging finance or looking to explore any alternative, we can help.