Bridging finance is a short-term loan used to bridge a financial gap between the purchase of a new property and the sale of an existing property. There are two main types of bridging finance; open and closed.
Open Bridging Finance has no set date for the loan to be repaid. This type of bridging finance is typically used when the sale of the existing property is not yet complete, so there is no set date for when it will be sold. With open bridging finance, the borrower may not know exactly when they will have the funds to repay the loan, so the loan is open-ended.
Closed Bridging Finance is where there is a set date for the loan to be repaid. This type of bridging finance is typically used when the borrower knows when the sale of the existing property will be completed, and they have a set date for when they will receive the funds from the sale. With closed bridging finance, the borrower has a clear exit strategy for repaying the loan, which gives the lender more certainty and reduces the risk of default.
The key difference between open and closed bridging finance is the repayment terms. Open bridging finance is open-ended, with no set date for the loan to be repaid, while closed bridging finance has a set date for the loan to be repaid. Which type of bridging finance is most appropriate will depend on the borrower’s individual circumstances, such as when they expect to receive funds from the sale of their existing property.
If you want to find out more about bridging finance, you can talk to ASC directly.
