What is a Bridging Loan?
A bridge loan is a type of gap financing arrangement wherein the borrower can get access to short-term loans for meeting liquidity requirements. It is often used to meet current obligations, while permanent financing is being secured.
As is self-explanatory in the name itself, bridge loans are meant to “bridge the gap” until the borrower secures a mortgage or a long-term loan.
Such loans, which must necessarily be backed by some collateral – either real estate or business inventory – usually have relatively higher interest rates and fees. Companies as well as individuals, who are in need of immediate cash flow, can access such loans.
Do I need a bridge loan?
Individuals and companies that:
- are affected by TDSR
- are experiencing short term cash flow issues
- can capitalize on high return opportunities
- need to secure time sensitive deals
How much is a bridging loans?
Interest rates on bridging loans range from 10-15%. There are a few factors that help determine the interest rate bridge loans are set at including:
- Loan-to-value (LTV) of security against loan amount
- Type of security utilised
- Ease of liquidity of security
- Credit profile of the borrower
Other costs that are incurred for a bridging loan include:
- Security valuation fee – An independent valuer is usually engaged
- Legal fees – A law firm will have to be engaged to draft the loan contract
- Arrangement fee – A one-time fee to be paid upon successful loan application
- Early repayment fee – Applicable if duration of the loan be less than initially agreed upon
Can I get a bridging loan with bad credit?
It depends. Major banks and financial institution have different risk appetites and are governed by the Monetary Authority of Singapore (MAS). Applicants who have defaulted before or don’t have a strong credit score are usually denied bridging loans from banks.
However, private financial institutions like Rikvin Capital may be able to help these applicants depending on the quality and loan to value of the security that is collateralised.
Are you looking for a bridge loan?
Liaise with a dedicated specialist when you engage us for our bridging loan services. We will walk you through every step of the loan application.