Speaking of commercial bridging loan, this is actually a term that is used to commonly describe a form of finance in which, is typically used for funding short term deficit in funds, particularly when someone wishes to purchase a business asset while waiting for the proceeds of the sale of an existing asset. If it happens that you are having a hard time understanding the description we provided, then we will make things easier for you to understand. 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. Since we talk about commercial bridging loans, we want you to know that this form of finance actually has two separate types and every single one of them has their own situations to cover.
The first type of commercial bridging loan that we want you to know of is the closed bridge and speaking of which, it is a name given to a type of bridging loan that are specifically designed to fund short term capital that is needed for purchasing new property when the old property has already had sales contract exchanged. Since a sale that has gone past the contract stage is known for frequently falling through, lenders see these closed bridging loan as a fairly low risk loan, not to mention how they are willing to supply the required funds very quickly as long as the details of the contract of sale is given, together with the details of the offer that has been made regarding the new property.
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. It is safe to say that open bridge is a form of commercial bridging loan where lenders are being very careful and cautious to provide to borrowers, especially with how they see it as fairly high risk, thus often reflected on severe default penalties as well as increased interest rates. All in all, the type of commercial bridging loan you will get will depend on the kind of borrower you are.