There are times where your business will only need finance for a short period of time. Whether it’s two months or two years, these can be for anything ranging from a small commercial project to big business improvements that you want to quickly pay off. Different types of short-term financing include closed bridging and open bridging finance. But what is the difference?
Closed bridging finance
When a closed bridging loan is arranged, lenders know how the loan will be paid back. This is referred to as the exit strategy. In order for closed bridging finance to go through, proof is needed of how the loan will be paid off. Due to the clearly defined exit strategy, there is usually a lower interest rate on closed bridging loans as there is a lower risk of the lender not being paid back.
Open bridging finance
Open bridging loans occur when there is no clear exit strategy. Even though there is a date agreed, how the owed money will be paid back might not be finalised. As lenders view this process as being more risky, higher interest rates are usually agreed on. Due to the short-term nature of this financing, short-term bridging loans usually come with higher rates than long-term financing.
If you’re considering a short-term bridging loan, we know how to maximise the benefit to you without incurring extra risks. Contact your local ASC Director who will look at the specifics of your project and find the best way to achieve it.
