Bridging finance is typically short-term financing designed to help businesses bridge the gap between immediate financial needs and longer-term solutions.
This versatile funding option can be used for various purposes, such as managing cash flow, funding expansion projects, or covering unexpected business expenses.
The interest rates quoted are per annum and is calculated each month on the outstanding capital e.g. if the annual interest rate is 12%, the monthly interest rate is 1% (12% divided by 12 months) on the outstanding capital. As the loan is repaid in equal monthly instalments you will be receiving part of your capital back each month and so the size of the loan will reduce each month and you will have received slightly less than half of your money back at the half way point of your loan term. This means that although the interest rate stays the same it will apply to a progressively smaller capital amount. It works just like a mortgage (but in reverse).
All loans are generally secured by a first charge over the assets of the borrower company and recorded on the Personal Property Securities Register. In some cases, a subsequent charge (not first) may be necessary if the first charge is with the borrowers main trading bankers. In addition a personal guarantee is obtained from each of the directors. In certain circumstances a further security by way of a subsequent mortgage over the directors and/or guarantors real property may also be required.
There is no doubt that there is significantly more risk in lending directly to SMEs (compared with a Member depositing funds with a bank) because a bank is intensely regulated, subject to many laws and typically benefits from a large and diverse revenue and collateral base. An equity investment depends on many different economic and legal differences. Members who make a loan are not investing in Zool Capital nor are they pooling their investments with other Lenders. Therefore it might not be reasonable to compare loans made through the Platform with bank deposits or equity investments. Instead, you should consider comparing against other comparable lending. Depending upon the type of deal you select and the way in which your money is spread across a number of loans the overall risk should be reduced.
