Real Estate Investor Magazine South Africa July 2015 | Page 30

FINANCE

Bridging Finance
The advantages and disadvantages
of obtaining bridging finance
BY MARLON SHEVELEW

B

ridging finance is a flexible, short-term loan,
which, in a property context, is most commonly
utilised to finance the purchase of a new
property against the sale of an old one. This temporary
form of funding provides a financial bridge for the
borrower until money becomes available to pay back
the loan. In this way, it offers quick-access financial
respite to a prospective investor.
Traditionally, bridging finance have been used by
residential or commercial property investors and it
can be ideal where one needs to close the deal quickly
on a new property, save an existing property from
foreclosure, or simply buy some time until longer-term
financing can be secured.
The interim nature of bridging finance holds both
advantages and disadvantages. It can be very beneficial
for providing a flexible form of finance for short-term
opportunities by enabling fast funding and a temporary
cash injection; however, its biggest advantage is also
its biggest drawback. Since the time-period within
which the loan must be repaid is shorter, the individual
payments will inevitably be larger.
A well-considered balancing of inherent pros and
c