Bridging Loans for Construction Projects: Keeping Your Build on Track

When working on a construction project, hitting your deadlines is critical. However, it is dependent on many things, not least cash flow. Without the money behind you to purchase materials or pay staff and contractors, your project can be completely derailed. This is why construction finance options such as bridging loans can be helpful.

Long payment cycles where clients pay at the end of the project don’t mix well with the upfront costs for labour and material purchases. And clients not paying on time or project delays and overruns cause additional cash flow problems throughout the project. These are unique challenges that the construction industry faces, and therefore, bespoke industry solutions are required.

At Honey Asset Finance, we understand the different situations you can find yourself in with a construction project. We also understand that the solution shouldn’t be out of the box because that won’t always work for your business. This is why we offer bespoke bridging loans that enable you to continue your project without worrying about the finances.

In this blog, we share everything you need to know about bridging loans for the construction industry.

What is a Bridging Loan and How Does It Work?

Put simply, a bridging loan is a fast, flexible funding solution for short-term needs. As the name suggests, it can be used to bridge the gap between payments.

This is incredibly helpful in the construction industry, where you might not see a penny of the project costs until it is finished, yet are still expected to meet upfront costs for the materials and labour to get the project started and to keep it going on track..

Construction finance options, such as a bridging loan, mean you can pay for your outgoings to continue a project, even when the cash flow might be a little slow. This means you can keep to deadlines, so your reputation remains intact, and you can get paid for the project on time.

It is also worth remembering that you could also use a bridging loan to cover a period of time before other funding solutions become available. For example, before a mortgage is put in place or you receive a development loan.

Why Bridging Loans are Useful for Construction Projects

There are a number of benefits to choosing a bridging loan as a construction finance option.

• Overcoming delays due to slow funding – You can avoid waiting on mortgage approvals, sales or end-of-project payments before starting your next project.
• Covering unexpected costs – It will enable you to quickly fund unforeseen expenses like material price hikes or contractor fees.
• Supporting staged payments – The payment can be made in stages, ensuring steady cash flow throughout different construction phases.
• Securing new opportunities – The loan can be used to pursue opportunities such as purchasing land or property quickly before competitors, so you can get on with new projects.

Because of their short-term nature, bridging loans often meet the individual challenges that construction companies face, making them the perfect solution.

How to Secure the Right Bridging Loan

Understanding VAT on vehicle finance is essential for businesses looking to optimise their cash flow and Bridging loans all work in the same way, but they can have different terms and conditions, which is why it is important to secure the right one for you. This is also why they may not always be appropriate for your position, where a more appropriate financial solution might be available.

Here are a few tips to make sure that you get the right bridging loan:

• Work with a trusted finance broker – Brokers can help ensure you get the best terms available.
• Understand the costs – Interest rates, fees, and repayment structures differ, so make sure you understand what you are being offered so you can make an informed choice.
• Plan your exit strategy – Make sure you know how you will repay the loan in full (e.g. with a property sale, mortgage etc.).
• Check eligibility – Factors like creditworthiness, loan-to-value ratio, and project viability will impact your ability to get a bridging loan, so make sure you know where you are with these before applying.

Again, one of the most valuable tips we can offer here is to contact a professional finance broker who will be able to help you secure a loan that fits your needs and future repayment ability.

Keeping Your Project on Track with a Bridging Loan

Bridging loans are a great construction finance solution because they meet the short-term needs often produced by the unique challenges in the industry.

They cover the gap that you might find yourself in between being paid (either by a client or another funding source) and paying other costs or starting a new project.

At Honey Asset Finance, we offer versatile and flexible bridging loans to help you in a range of situations, be it purchasing a new property, covering short-term cash flow gaps, or awaiting longer-term financing. Partnering with leading finance experts in the industry means our solutions have competitive rates with bespoke finance packages.

Our team prioritise person-to-person advice, so you don’t have to deal with AI chatbots or automated replies. Instead, you get a bespoke experience from the minute you contact us. We believe this is important to be able to provide a truly custom solution that meets your exact needs and situation.

This also enables us to provide a quick response because we know that often, time is of the essence.

So, if you are in need of cash right now on a construction project, whether halfway through or just starting, don’t hesitate to get in touch with our experts to discuss your construction finance options and bridging loan requirements.

We will guide you through every step of the process, so you don’t need to worry about anything but keeping your project on target.

Call us on 01305 239500 or complete our online contact form, and we will get back in touch with you.