Arranging Bridging Finance in America

One of the main benefits of a US bridge loan is how fast you can draw down loan capital. Because lenders can complete bridging loans in as little as one to two weeks, they provide a way for you to access capital quickly when needed. You can also use this type of finance instead of conventional property finance if using a mortgage doesn't fit with your plans, or you cannot get a mortgage quick enough to complete the property transaction, as is often the case. You can also use bridging financing to release a sizable amount of equity from a property you own in the US.

The main benefits of US bridging financing include:

Speed

US bridging loans are often much easier to arrange than a mortgage, and one of the quickest ways to obtain capital is through bridging finance, which can allow you to access funds in as little as 1-2 weeks. As a result, you will have the liquidity you need to carry out your plans or projects as quickly as possible.

Flexibility

Being one of the most versatile financial instruments accessible, you can use bridging finance to raise the capital you need to solve problems or make things happen. Lenders don't have specific lending criteria you need to meet, and they don't only lend in specific scenarios - they can consider lots of different use cases, whatever your scenario or situation. You will still need a clear strategy that defines how you will use your loan and manage what you borrow. 

Access to Large Loans  

US bridging loan providers frequently focus on a single area of the market, with some offering large loans and others smaller loan sizes. A small US bridge loan will start at about $50,000 - usually equity release deals, and you can borrow hundreds of thousands of dollars. At the top of the scale, the lenders that provide significant loans can easily offer $1 million or more. US bridge loans of $10 million or more are typical, especially in property hotspots and big cities with high-value real estate. 

It's also important to consider the potential pitfalls of a US bridge loan. These include: 

Price

The cost of bridging loans is higher than that of traditional mortgage products. This is due to the speed (1-2 weeks) with which lenders can complete transactions, the risk involved, the flexibility provided by bridging loans, and because you will only borrow for a short amount of time.

Additional fees

You may be required to pay additional expenses in addition to interest, usually including legal fees, lender fees, appraisal fees, and arrangement costs. Depending on your financial situation, where you live, your objectives, and how complex the deal is, you may also need to factor in costs for tax advice and professional service providers. The loan capital won't cover these costs, so it's essential to be aware of all these fees upfront so you know when you have to pay these and what borrowing will cost in total.  

Risk

Bridging finance is a secured loan, meaning you risk losing your property if you cannot make your payments. To make sure that the loan is successful, you must understand all the benefits and potential pitfalls of this type of lending, the loan must be affordable, and you must have a plan stating how you will handle and repay the loan.

You can also use US bridging loans to unlock equity from unencumbered US real estate. Here, your US property will be the security for the loan. As long as you have a defined reason for borrowing and an exit strategy that the lender is confident you can deliver, you can use the loan to achieve different outcomes. For example, you might want to consolidate debt, invest, grow a business, buy property or assets or cover a short-term gap in borrowing. Lenders can consider equity release deals where the loan is used domestically in the US or abroad. 

US bridging loans are always short-term financing options. How you repay the loan differs from other financing products like mortgages that require you to repay the capital and interest over many years. You will repay your bridging loan as a lump sum, and this repayment is known as your exit. Your lender will want to understand how you will exit your loan upfront, and you will need a defined plan of action for how you will deliver your exit that you can clearly explain and document.

Common exit strategies include:

Refinancing

One of the most common ways to exit a US bridging loan is by refinancing the loan. Here, you will refinance through a different lender, typically choosing a mortgage or other traditional property finance product. If you take out a large loan, you will usually refinance to a long-term loan that you will repay over many years, and your new lender will repay your US bridging loan. 

Sell property

Another common exit strategy is selling the property the loan is secured against and using the proceeds of the sale to repay your bridging lender.  

Liquidity events 

You can also exit a US bridging loan using significant capital you receive from other sources, usually called a liquidity event. Lenders can consider various possibilities here, including selling other assets or real estate in your portfolio, a liquidity event like a divorce settlement, or selling a business you own. If you intend to exit via a liquidity event, expect lenders to want details and documentation showing when you will obtain the money you will use to repay the bridging loan, how much you will receive and how confident you are that you will receive it. 

If you take out a US bridge loan, you do not always have to use the loan capital in the US - especially in equity release deals. In these cases, lenders usually offer what’s called multi-currency lending. Here, you can use US real estate as security for the loan but draw down the loan in pounds sterling, Swiss francs, euros or other mainstream currencies - depending on where you will use the loan. For example, you can use US bridging finance to consolidate international debt, purchase property overseas, invest abroad (in securities or a business), or generate capital for a project outside the United States. The ability to draw down the loan in another currency is especially useful if you want to use the loan to fund international projects.