What Is The Application Process For Short-Term Bridging Loans?
Short-term bridging loans are becoming increasingly popular in Australia, they originally were designed to help bridge the gap between buying a new home and selling your current one, however now they are a popular type of business finance. There are other situations in which you can consider short-term bridging loans, which we will discuss later.
These loans are short-term, typically lasting 6 to 12 months, and vary from $20,000 to $5,000,000, depending on the lender and available equity in the property. In Australia, you can often apply for a bridging loan online. Private lenders, in particular, are known for offering easy application processes, minimal paperwork, and fast funding within 1 to 2 days of application.
How do short-term bridging loans work in Australia?
If your business needs some fast funding a private lender is a great option when considering a bridging loan. Finding the correct lenders and bridging alternatives is essential for hassle-free financing during this time. The lender you choose will typically mortgage your current home and use the available equity to provide the funding your business needs. You can select to pay the interest monthly or have all costs capitalised into the loan, but the lending options available vary depending on the lender you use.
What is the application process for short-term bridging loans in Australia?
Now that you know what a bridging loan is, it is time to check out the application process.
1. Initial Inquiry
All bridging loan applications start with an initial inquiry. One of the professional advisors will discuss your situation, needs, and options. Your advisor will discuss what you want to use the loan for, how much you want to borrow, details of your exit strategy, how long you need the loan, and what collateral to use.
2. Credit Offer
Once our advisor understands your requirements, they will use this information to assess the suitability of a bridging loan and, assuming that the borrower meets these criteria, the 2nd mortgage lenders will offer you the best deal for your situation. With access to unique products as a business loan lender, we offer the best bridge financing for any circumstance. Once our professional advisors have found a suitable financial solution that meets your needs, you will be send a letter of offer outlining the terms of the funding.
3. Real Estate Appraisal
As part of the formal application, the next step is property value assessment. No formal valuations are required but a local real estate agent is contacted to conduct a market appraisal.
4. Review of Documents of The Applicant
2nd mortgage Lenders conduct due diligence on the documents presented with the application once an offer is submitted, these include proof of identity, current mortgage statement, rate notices, and proof of exit strategies.
5. Signing of Loan Contracts
Once a formal approval is obtained loan contracts are issued for the borrower to sign and return, this is done via a nominated solicitor.
6. Release of Funds
The final step in the bridging process is the release of funds after contracts are signed. Once the all the checks are completed and the security registered, the funds will be released and transferred to your designated bank account.
Are short-term bridging loans expensive?
A bridging loan is a type of short-term mortgage, and the interest rate on a bridging loan varies from lender to lender. Many factors affect the cost of a bridge loan. It is more expensive than a 30-year long-term mortgage but is only a short-term solution.
Bridging loans are available for any worthwhile business use and to any business owner who has sufficient equity in a real estate asset. The main requirement for a 2nd mortgage or bridging loan is that the borrower has some equity in their property and a solid exit strategy, such as selling the current property.
If you are an individual sole trader or a business owner; funding can help you and your business expand or cover any unexpected expenses. Provided you have the equity in real estate you are almost certain to be approved and funding in as little as 24 hours.
End Thoughts
How long the bridging process takes from the initial request to the release of funds depends on your specific circumstances and the lender you use. Generally, you can expect your application can get approved within 24-48 hours and the funds immediately after that.