In the market's evolving landscape, bridging finance has emerged as a crucial tool in facilitating the funding of ESG-compliant projects, according to Brecher LLP.
Businesses embarking on ESG-compliant projects often face initial capital outlays that require timely funding, but due to the long-term nature of ESG goals, obtaining traditional financing—such as long-term loans—can sometimes be challenging.
Brecher says bridging finance can provide an effective solution for businesses committed to ESG-compliant projects, highlighting some of the key ways in which it offers support:
1. Quicker access to capital
ESG-compliant projects often involve complex regulatory approvals and time-sensitive milestones. Bridging loans provide the flexibility and speed necessary to secure immediate capital while awaiting longer-term financing options. This flexibility is particularly valuable in fast-moving sectors like real estate development, where early-stage capital is needed for design, permits, and other preparatory work.
2. Flexibility for ESG Integration
Many ESG-compliant projects require ongoing adjustments, such as incorporating green building standards, upgrading energy-efficient technologies, or adjusting project scopes to meet environmental regulations. Bridging lenders typically offer around six- to 24-month term loans which enables project developers to move forward while ensuring they can make necessary changes to stay compliant with ESG standards as they evolve.
3. Filling Financing Gaps in the Early Stages
Bridging loans can be used to cover immediate costs such as feasibility studies, environmental assessments, and obtaining ESG certifications or approvals. This short-term funding can be vital for addressing the costs incurred during the early stages of an ESG-compliant project before long-term financing, including green bonds or ESG-linked loans, is secured.
