How and Where to Spend Commercial Bridging Finance

commercial bridge loanKnowing how to effectively and efficiently utilize one’s resources is one of the keys to success. It doesn’t take a genius to know that wasting one’s stash is a recipe for disaster. There’s simply no other way. But achieving such feat is a more complex and herculean task and one of the aspects to it happens to be adequate knowledge. That is why we’ve compiled this article to guide everyone on how and where to spend one’s commercial bridging finance.

But before we even proceed, what on earth is commercial bridging finance? The term refers to a specific type of temporary and interim financing used to provide for the short term liquidity needs that come with the purchase of commercial real estate assets. It is taken pending the arrangement and/or availability of a permanent fund line, one that is long term in nature and bigger in value. Unlike its long term counterparts, it runs for only two weeks to two or three years.

Now what are these short term liquidity needs? These are expenses that are immediate and pressing in nature. They are those that have to be provided for otherwise the commercial asset transaction would not be viable and would never take place. To cite a few examples, we’ve listed them down as follows:

    • Research Costs – These are the expenses that go into the activities done in the pursuit of the right investment. After all, a great isn’t one to come a-knocking.
    • Professional Fees – Experts will be taken aboard at some point. Everyone will need a lawyer or solicitor for all legal requirements while some would further need assistance from a broker or agent.
    • Survey Costs – No one should acquire an asset without first having it examined, surveyed and revalued. This does not come free. As to how much depends on the extent of the survey report.
    • Security Deposit – While one seeks to arrange their financing, buyers would often pay a security deposit to the seller to prevent the later from offering the asset to another interested party. Once the time has lapsed and the buyer does not come back to make a down payment, the deposit can no longer be reimbursed. If the buyer makes it, the deposit forms part of the total payment at selling price.

    • Down Payment – Commercial bridging finance is popularly utilized for this short term liquidity need. A down payment is composed of a portion of the total list price, often at 20% at the least, which must be paid as part of the deal. Without it, no sale shall occur.

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