According to the Small Enterprise Finance Agency (SEFA), bridge loans are short-term loans that are provided to an enterprise to finance working capital needs.
Bridge finance can also be described as a short term loan that is secured against a future income resulting from a transaction involving immovable property. This income can be from the sale of the particular property or from the registration of a bond or a further bond over the property.
Why would you use bridge finance in South Africa?
- To convert equity in your property to cash
- To improve cash flow
- This type of finance can also be useful in the business sector, as you can maintain stability within your business.
Who qualifies for bridge finance in South Africa?
If you have sold a property or you have been granted a further bond.
If you are awaiting funds from a pension or provident fund pay-out, an RAF claim or estate agents awaiting commission or a maturing endowment.
Certain businesses may rely on bridge finance to provide them with working capital. This finance is also quite popular for start-ups.
In South Africa, the Bridging Finance Association of South Africa (BFASA) was formed to ensure the long term sustainability of the bridging industry. It also promotes ethical and socially responsible conduct by members.
There are a range of micro lending institutions that offer bridge finance in South Africa. One such lender is NHFinance (www.nhfinance.co.za).
NHFinance allows individuals to apply for a personal bridging finance loan if they have funds due to them but they need cash immediately. The lender also provides business bridging finance to boost cash flow as well as finance to individuals who need to release equity in their property when they require funds fast.
To learn more about bridge finance, speak to a broker. It’s important to make sure that you understand how the process works before signing any contracts with lenders.