When we say commercial bridging loans, we are actually referring to a form of finance that is commonly used for funding short term deficit in funds, especially when a person wishes to purchase one business asset while waiting for the proceeds of a the sale of an existing property. For those of you out there who may have a hard time understanding the description we stated above, then we will make it simpler for you to decipher. You can actually say that almost all companies nowadays are wishing to move to a much bigger and much better premise to let their business grow and prosper even more but, in most causes, they will still foresee some delay in the actual selling of their existing property. And because of that, companies need to make use of commercial bridging loan since this loan is something that they can use to supply the funds they need to make the new purchase while still waiting for the existing premise to be sold. Now that we mention about commercial bridging loans, we want you to know that there are two separate types of it and each one of this type is designed to cover certain situations.
One of the two types of commercial bridging loan that you should know of is the closed bridge and talking about closed bridge, it is a form of bridging loan that are designed to fund short term capital need to purchase new property, especially when the old property has been placed to a property exchange already. Since a sale that goes past the contract stage has the tendency of falling through, lenders are making the most use of closed bridging due to it because a low risk, leading them to become more willing to supply the needed funds very quickly as long as the details of the contract of sale is present and as long as the details of the offer for the new property is given as well.
On the other hand, when we say open bridge, this is a far more complicated loan type than the closed bridge as it is described as a kind of commercial bridging loan that is used to cover the purchase cost of the new property while the existing property either has not been placed on the market yet or has not been sold yet. You can actually say that this is the type of bridging loan where lenders are being keen in providing to borrowers because of how risky it can be and it is often reflected on the increased interest rates they have for it and also, several default penalties too. All in all, the type of commercial bridging loan you will get will depend on the kind of borrower you are.