Bridging loan – is it worth it? Description of three offers!
A bridge loan is a form of aid that is granted during the implementation of an investment project.
The definition Bridging Loan
Banking institutions grant it to investors who have previously submitted an application for an EU subsidy. Its task is to provide them with liquidity until they receive a refund.
The bridging loan may be paid out by banks once or in tranches. This type of financial liability has many advantages:
- allows you to start investing before receiving a refund,
- is the source of project financing before obtaining funds from the subsidy,
- interest rates and collateral are set by banks individually.
Just like a classic cash loan, it repays both capital and interest. In turn, the borrower taking the bridging loan covers only the cost of interest. The capital part is regulated by the EU subsidy.
A bridging loan in connection with an investment loan
Some bank branches together with a bridge loan also offer clients an investment loan. However, this is not a beneficial option for them. Most often, this type of financial liability has a high-interest rate due to the high degree of risk. It is awarded for the implementation of expensive investments.
Who can apply for a bridging loan?
After submitting the application for EU subsidies, the next stage is applying for a subsidy loan. Investors who can apply for a bridging loan are:
- local government units,
- public institutions.
Who has no chance of getting a bridge loan?
Entrepreneurs who are unable to present a reliable business plan cannot count on receiving a bridging loan. The application will not be accepted if they have low credit standing.
Financing for starting a business and a bridge loan
Investors who have decided to start a business usually do not have the entire amount needed at the start, even though they have previously used a business loan. The decision was made by a ranking of business loans. To obtain an EU subsidy, an application for funding for starting a business must be submitted. The EU subsidy is usually awarded in the form of refunds.
Pursuant to the provisions of §8 para. 1 of the Regulation of the Minister of Regional Development of August 13, 2008, on granting financial assistance by the Polish Agency for Enterprise Development to support the creation and development of the electronic economy under the Operational Program Innovative Economy, the amount of the EU subsidy may be up to 85 percent. expenditure on the implementation of the investment.
At the same time, §8 para. 2 of this Regulation assumes that the co-financing cannot be lower than USD 20,000, but not higher than USD 1 million. This means that a minimum of 15 percent. investment value must come from own contribution.
How do you get a bridging loan?
The bridge loan is granted by bank branches. An investor who chooses it should prepare for the necessary formalities. The application for a bridging loan must be accompanied by:
- business plan of the planned activity,
- attachments in the form of an estimated balance sheet, profit and loss account,
- documentation showing good customer relations with banks.
You can apply for a bridging loan before or after applying for an EU grant. The borrower should remember an important fact. The bank will not grant a bridging loan to the investor without documenting the grant application.
Bridging loan amount
A bridge loan allows you to finance up to 100 percent. investment costs with funds that come from an EU subsidy. Some bank branches offer borrowers the option of postponing the bridging loan repayment date if the refund is delayed.
After considering the application for a bridging loan, the borrower does not receive any cash. It only has the option of making non-cash payments during the subsequent stages of the investment. Instead, he can enter the loan in the business expenses that he has in cash.
Bridging loan – glossary of terms
Credit promise – a preliminary guarantee that the bank will grant a loan to a customer who has creditworthiness.
Tranche – part of the loan that is paid out by the bank.
Registered pledge on the subject of subsidies – is a limited property right that is chargeable to movable property. The purpose of this action is to secure your claims.