Quick Funds, Quick Solutions: Short-Term Property Finance

Introduction

” Access to short-term ” financing can make or break a deal for many property investors and developers. When an opportunity arises but funds aren’t readily available, short-term lending solutions allow investors to secure properties quickly with the intent to refinance the road. Short-term property finance offers more incredible speed, flexibility, and higher loan-to-value ratios than traditional bank loans.

The Advantages of Short-Term Property Finance

Short-term property finance solutions provide rapid Access to funds while requiring less stringent eligibility criteria than conventional loans. Here are some of the key advantages:

Speed

Securing financing in days rather than weeks or months can allow property buyers to jump on time-sensitive deals. Short-term loans are funded rapidly once approved, enabling quick Access to capital.

Flexibility

Investors can utilise short-term financing for various property-related needs, from acquisition funding to renovations, without typical bank restrictions. There is greater flexibility in how the funds are used.

Loan-to-Value Ratios

Whereas banks typically lend up to 80% loan-to-value on an investment property, short-term lenders may provide 85% to even 90% or higher. This allows buyers to take on deals with less cash outlay.

Credit History Less Important

For individuals with less-than-perfect credit, short-term property loans emphasise the deal/transaction rather than credit scores when assessing risk. Those turned down by banks may still qualify.

Common Uses for Short-Term Property Finance

From real estate investors to developers and builders, short-term property finance serves multiple segments with capital needs that can often take time to meet through traditional lenders. Whether for purchasing discounted properties, funding construction projects, or bridging gaps between financings, these industries rely heavily on the responsiveness and versatility offered by alternative lending solutions. 

The ability to qualify for and access short-term loans quickly allows investors and developers alike to capitalise on narrow windows of opportunity that would otherwise slam shut. In fast-paced, competitive industries, flexibility and speed are paramount. Timing is everything and drawn-out applications through conventional banks result in missed prospects. Short-term property finance is integral in keeping deals progressing smoothly across this domain by meeting urgent capital needs that traditional financiers tend to handle slowly.

Acquisition Funding

In the most common use case, short-term loans allow quick Access to capital to seize time-sensitive purchase opportunities before they are gone. The speed of funding makes these loans ideal for acquisitions.

Auctions & Distressed Assets

Capitalizing on property auctions and distressed assets (e.g. foreclosures) often requires bidders to produce funds on short notice, a need short-term financing is designed to meet.

Renovation & Construction

Builders and developers rely on rolling credit facilities and short-term loans to fund phased projects. At the same time, investors utilise this finance to fund renovations that allow them to re-position and add value to existing assets.

Bridging & Refinancing

Borrowers can use short-term loans to bridge the gap between the purchase of one property and the sale of another or to refinance higher-cost debt into more favourable longer-term mortgages once project milestones are met.

Key Short-Term Property Finance Options

While specific products differ across lenders, short-term property loans typically fall into one of these categories:

Bridge Loans

These medium-term loans (e.g. 12 months) are used as a bridge to provide liquidity before securing final take-out financing. Bridge loans generally have higher interest rates but faster approvals.

Lines of Credit

Revolving and flexible, lines of credit provide access to pooled funds on an as-needed basis over a set period, up to a defined limit. Drawdowns and repayments can be made multiple times.

Blanket Loans

A blanket loan provides a lump-sum amount for multiple properties simultaneously – a line of credit on steroids. Investors save time by not having to finance each property separately.

Mezzanine Financing

This refers to a loan secured against the equity in a property rather than directly on the property itself and is typically used to top up financing if senior lending caps have been reached.

Conclusion

Short term property finance fills an important niche, allowing investors, developers, and players to capitalise on time-sensitive opportunities. Providing rapid Access to funds with greater flexibility and less onerous eligibility criteria than traditional loans, short-term property finance offers clever solutions for temporary capital needs as borrowers progress towards their long-term finance objectives. Short-term property finance can be an essential source of capital for real estate investors seeking to purchase discounted properties or developers needing to fund ongoing construction projects. 

Its versatility and responsiveness equip borrowers to progress timely deals that might otherwise fail due to a lack of accessible financing. Short-term property finance empowers vital industry players to seize fleeting windows of opportunity, whether utilised as acquisition funding, renovation loans, or bridge loans. Read More About Global Finance for the Future