Wider Use of Bridging Finance - 'Finding its Place'

The past two years have seen a breakthrough for bridging finance as it has found its place in the financial mainstream.


 Although property was hit hard in the recession, savvy investors have called the bottom of the market in certain localities and returned, using short-term finance to take advantage of opportunities. We’ve seen considerable growth in the auction market, which is enjoying a boom period.  Bridging finance can be turned around in one day, so clients can secure bargains at auction knowing they have the funding to seal the purchase.


Whilst property transactions should continue to be the bread and butter of bridging lenders, reduced liquidity in the banking sector due to the economic downturn has led SMEs to bridging for other reasons.  In the last six months, we’ve seen a 53% increase in enquiries from companies looking to use short-term finance for something other than property acquisitions.


The signs are there that bridging’s move into the mainstream will continue even as we shift further out of recession.  There will always be a place for fast short-term funding in a rising or falling market.  In recent years more professional firms have entered the market; competition has driven market prices down and ensured transparency of terms.


Short-term lenders are also seeing an increase in high-street bank referrals.  Once considered competition to banks, bridging is recognised by professional advisors as complementary to traditional long-term finance.  Banks are introducing customers whilst material changes occur to propositions to allow for credit sanction.


Professional advisors are recommending bridging to businesses going through takeovers or mergers, as it’s often necessary to arrange capital swiftly.  Similarly, for management buy-ins (MBIs) or buy-outs 9MBOs), funds can be raised based on the existing businesses balance sheet or directors’ assets whilst due diligence is carried out for longer-term funding.


Of course, it’s not one size fits all and it’s important that businesses find the right funding partner for their circumstances.  As the short-term finance market continues to mature, the onus is on professional advisors and intermediaries to keep on top of developments from trusted and established short-term providers.


The establishment of the Association of Short Term Lenders (ASTL) ensures best practice for member companies.  In striving to continually improve standards across the sector, bridging lenders are set to play a significant role in the growth of businesses for years to come.


Steve Barber September 2010

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