Unravelling Open Bridging Finance: A Comprehensive Guide

Posted on 4 July 2024 by webadmin
Unravelling Open Bridging Finance: A Comprehensive Guide

Introduction to Open Bridging Finance

Bridging finance is a short-term loan used to “bridge” the gap between the purchase of a new property and the sale of an existing one. Open bridging finance specifically refers to bridging loans without a fixed end date, offering flexibility for borrowers who might be uncertain about when their existing property will be sold.

Key Features of Open Bridging Finance

  1. Flexible Repayment: No fixed end date, allowing borrowers to repay the loan when they have the funds available.
  2. Short-Term Solution: Typically used for periods ranging from a few weeks to a year.
  3. High-Interest Rates: Higher rates compared to traditional loans due to the short-term and flexible nature of the finance.
  4. Security: Loans are usually secured against property, providing lenders with collateral in case of default.
  5. Quick Approval: Faster processing times, making them ideal for urgent financial needs.

When to Use Open Bridging Finance

  • Property Purchase: When buying a new property before selling an existing one.
  • Auction Purchases: When purchasing property at auction where immediate payment is required.
  • Property Renovation: To finance renovation projects that will increase the property’s value before selling.
  • Business Opportunities: To quickly seize business opportunities that require immediate funding.
  • Debt Consolidation: To consolidate high-interest debts into a single loan.

Advantages of Open Bridging Finance

  1. Flexibility: No fixed repayment date offers flexibility for uncertain situations.
  2. Speed: Quick approval process provides immediate access to funds.
  3. Short-Term Solution: Ideal for short-term financial gaps.
  4. Leverage Assets: Use property as collateral to access significant funds.

Disadvantages of Open Bridging Finance

  1. High Costs: Higher interest rates and fees compared to traditional loans.
  2. Risk of Repossession: If unable to repay, there is a risk of losing the secured property.
  3. Uncertain Repayment: Uncertain end date can be stressful if the existing property doesn’t sell quickly.
  4. Stringent Terms: Lenders may impose strict terms and conditions to mitigate their risk.

Eligibility Criteria

  • Creditworthiness: While credit checks are less stringent, lenders still assess the borrower’s credit history.
  • Exit Strategy: A clear exit strategy, such as the sale of a property or securing long-term finance, is crucial.
  • Equity: Adequate equity in the existing property is required as security.
  • Proof of Income: Demonstrating the ability to service the loan through income or other assets.

Application Process

  1. Initial Enquiry: Contact lenders to discuss needs and obtain quotes.
  2. Documentation: Prepare necessary documents, including property details, proof of income, and exit strategy.
  3. Valuation: Lender conducts a property valuation to assess the security.
  4. Approval: Lender reviews the application and provides approval.
  5. Legal Process: Engage solicitors to handle the legal aspects of the loan.
  6. Fund Disbursement: Once approved and legalities are completed, funds are disbursed.

Exit Strategies

  1. Property Sale: Selling the existing property to repay the loan.
  2. Refinancing: Securing long-term finance or a mortgage to pay off the bridging loan.
  3. Business Revenue: Using revenue from business operations to settle the loan.
  4. Investment Maturity: Utilizing funds from maturing investments to repay the loan.

Choosing a Lender

  • Reputation: Select reputable lenders with positive reviews.
  • Terms and Conditions: Compare the terms, interest rates, and fees.
  • Flexibility: Assess the lender’s flexibility in terms of loan structure.
  • Customer Service: Evaluate the quality of customer service and support.


Open bridging finance is a versatile and flexible solution for short-term financial needs, especially in property-related transactions. While it comes with higher costs and risks, its benefits can be substantial when used strategically. Understanding the features, advantages, disadvantages, and the application process can help you make informed decisions and effectively leverage open bridging finance to meet your financial goals.