Is investing in bridging finance a good idea? – Guide

By Helen Jackson 14th March 2022

If you’re an investor looking for new ways to invest your money, bridging finance could be an option worth exploring.

Bridging finance is a short-term loan used mainly by property developers and landlords to bridge the financial gap between buying and selling property or when purchasing property through an auction. The finance helps borrowers access cash fast to move quickly on new property opportunities.

In this guide, we’re talking about how investing in bridging finance could offer you a steady income stream, the risks associated with it and how you can keep your investment safe.

Read on to learn more.

This guide is not professional investment advice, and should just be used for guidance. For professional investment advice, seek advice from a specialist.

Can I invest in funding Bridging Loans?

If you’ve got cash to invest, the short answer is yes; you can invest in bridging loans. To invest in bridging loans, investors will usually need to be experienced and knowledgeable before proceeding. Some companies might only accept applications from high worth investors or professional investors. Therefore, it’s best to research your options thoroughly.

The short-term nature of these loans means it’s an attractive investment opportunity for any investor. A robust exit strategy means the loan is usually repaid in full in a short period, so there’s a chance you get your money back quicker than with other forms of investment.

Is it safe or good business sense to invest in Bridging Finance?

Like with any investment you make, it’s essential to weigh up the pros and cons of investing in bridging loans. It’s important to be aware that interest payments are not guaranteed, and like with all investments, your capital is at risk.

If the borrower repays their loan as agreed, you will receive regular monthly interest payments, which means you can see money quickly. However, if the borrower doesn’t repay the loan on time, there’s a high chance that you won’t see interest payments that month — it’ll be delayed, or you might not receive it at all.

Bridging companies lending to businesses are not regulated by the Financial Conduct Authority (FCA). This means, as an investor, you are not protected by the Financial Services Compensation Scheme (FSCS), and you don’t have access to the Financial Ombudsman Service (FOS) if a complaint is unable to be resolved.

What options are available to fund Bridging loans and what assets do I need?

To invest in bridging finance, the lender will usually want to see that you’re experienced and aware of the risks of investing in these types of products. Each lender will have its own criteria for investors, so it’s best to check with each company for specific details.

We’ve listed a few options for you to consider.

TAB HQ

And so far, TAB has lent £148m with £64m currently invested in total and has delivered £84m in repaid capital.

TAB offers the chance for investors to invest in property or property-backed loans. So as an investor, you might want to explore both to see which would suit you better. With TAB property, you can invest in property shares; this means when the tenant pays rent, you receive rental income paid monthly into your account.

TAB lending allows you to invest in property-backed loans with terms that suit your investment goals, helping you build and manage a diversified property portfolio and receive monthly interest payments.

Learn more information about investing with TAB.

Black and White Bridging

Black & White Bridging offer investors the chance to invest in their loans, and pride themselves on always returning every penny — capital and interest of their investor’s investment to date. This is across £90m of lending and over 200 loans.

Black & White bridging offer investors flexibility when it comes to choosing to invest in certain products or regions. Under their standard model, they offer all investors sub=charges to the loans they’ve underwritten. This gives investors transparency when it comes to understanding where your money has been utilised.

Learn more about investment opportunities with Black & White Bridging.

Thinking of starting your own bridging loan company? Check out our guide.

What options are available to protect my investments in Bridging in worst-case scenarios?

Some lenders might give you the reassurance that they’ve always been able to pay their investors the interest and capital owed. This is obviously a good sign for new investors looking to find the right fit, so this might be something you can consider when researching your options.

Always remember their past success does not guarantee their future success. So although having a good track record can help you gain confidence in the lender, you cannot assume this will always be the case.

The FCA does not regulate most of these lenders, so you are not protected should a complaint arise. And although your investments are secured against property, your capital is still at risk.

If you’re considering investing in bridging loans, make sure you’re not parting with money you’ll likely need in the near future.

This guide is not professional investment advice, and should just be used for guidance. For professional investment advice, seek advice from a specialist.

To sum up

Investing can generate some great results if the right opportunities are available and money is invested wisely. If you think you’d be interested to learn more about investing in bridging loans, don’t hesitate to get in touch with our recommendations above.

If you want to learn more about how bridging finance works, check this out: What is a bridging loan? Seven experts weigh in.