Bridge Finance Case Study
Bridging Finance is a method of financing used to maintain liquidity while waiting for an anticipated and realistically expected inflow of cash
. It is commonly used when the cash flow from a sale of an asset is expected after the cash outlay for the purchase of an asset. For example, when selling a house, the owner may not receive the cash for 90 days, but has already purchased a new home and must pay for it in 30 days. IT covers the 60day gap in cash flow.Case Study 1
A client required assistance through short term funding to complete the purchase of a vacant commercial building in the area.
It was needed due to the fact that the settlement date was only five days away and the broker had been unable to arrange conventional finance. A substantial deposit had been paid to the Vendor and contractors were arranged to fitout the building. The client would have lost their deposit had they not completed the transaction. In addition, there would have been a great increase in reputation risk as their industry knew of the planned opening and there would have been a backlash if the opening were to be delayed or indefinitely postponed.
Coming to the rescue, It provided a $1.0M month-to-month facility for 100% of the purchase price plus stamp duty for the client to complete the transaction and ultimately open their business on time.
The bridge finance agreement was completed in a five working day turn around. After completion of the project, the client refinanced with a mainstream lender in due course and repaid the bridge finance loan.
Case Study 2
A client wanted to purchase a business overseas. The client was living in the business location and wanted to take advantage of a lucrative business opportunity he had recognised.
The client had taken steps to urgently sell a vacant commercial building he owned. At his Real Estate Agents suggestion, the client approached us to advance sufficient funds to settle on the business overseas, providing the Client enough time to present the building properly, market it and sell in an orderly manner.
In a 7 day-turn-around period we were able to negotiate and settle a mortgage facility secured against the commercial property. As a result, the Client could sell that property in due course for full market value. We capitalised its interest for the entire term of the bridging loan and the cost of the entire facility was insubstantial in comparison to the lower price the Client would have gotten for an urgent sale of his property.
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