Bridging Finance is similar to the Short Term Finance which started in the UK in the early 1960’s. Bridging Finance is something that many people do not know about however it can be explained very simply, Bridging Finance is an Advance or Loan given to someone who is due to get money paid out to them soon. In the past only Banks did bridging finance but now many Financers also do bridging loans and help provide funds for those in needs.
Bridging loans are mostly used for property sales, helping the seller of a house to be able to purchase a new property by bridging money on their already confirmed deal (the house they are selling). Many Bridging Finance companies have found a way to use this method on other payments due to clients, for example Road Accident Fund (RAF) claims, Invoice discounting and many more.
How much do they usually allow?
Financiers will only advance you a percentage of what is owed to you, could be anything from 20% to 80%. For example, if you are owed R1,000,000.00 and they are willing to advance 60% of that amount you will get a loan/advance of R600,000.00. However, what needs to be kept in mind is they usually charge compound interest which could be a hefty amount to pay back when the time comes. There will also be fees which will be charged for the loan/advance so be sure to ensure you find all the information out before you sign the contract given to you.
What to keep in mind before taking Bridging Finance:
- The interest rate
- The type of interest (simple, compound ect)
- The Fees
- Try determine the length of time you’ll need the money for
- Are there monthly repayments
An indication on what you would need to apply for RAF Bridging Finance:
- Valid ID
- Proof of residence
- Proof of bank details
- Signed Offer
“Beware of little expenses. A small leak will sink a great ship “ – Benjamin Franklin