Business Bridging Loans

Our Business Bridging Loans Service Provides:

Call us on 0117 959 5094 to discuss your requirements.

Written by: Sam O'Neill & Sam Hodgson
Last Updated: 14/11/2023

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What are Business Bridging Loans?

A business bridging loan is a short-term secured loan that provides capital to businesses over a period typically ranging from 1 month to 3 years. The funds are used for a variety of business purposes such as:

Bridging loans provide fast access to capital, making them useful for time-sensitive business opportunities. The loans are secured against a property asset owned by the borrower, which acts as collateral.

Bridging loans are often used by property investors and developers who need to act quickly to acquire a commercial building or land for a project.

All types of bridging loans offer this same speed and flexibility. These loans allow deals to progress that may not be possible with traditional funding options – such as mortgages.

How Do Business Bridging Loans Work?

A business bridging loan works by providing a large lump sum secured against a business property. This may be an office building, warehouse, retail premises, or land owned by the company.

The loan is repaid after a short period, typically 0-3 years, when the borrower secures their long-term financing option such as a commercial mortgage or sale of the asset. The bridging loan effectively "bridges" the gap between buying a property and arranging permanent financing.

Interest payments are made monthly, with the option to roll up interest so it is repaid at the end of the term along with the original loan amount.

Bridging loans can be obtained through specialist lenders and brokers, such as us at Clifton Private Finance, who understand the nuances of commercial property finance. Beneficially, having our expert brokers onside helps access the best rates and terms from experienced lenders.

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What are the Benefits of Business Bridging Loans?

Several advantages make bridging loans useful for business property transactions, here’s a brief run-down of some of the key benefits:

• Speed & Flexibility – As we have already mentioned, funds can be secured in as little as 1 week, enabling businesses to move quickly to secure time-limited opportunities. And, loan terms typically range from 1 month to 3 years, enabling borrowers to match the loan length to their exact needs.
• Higher LTVs - Loan-to-Values (LTVs) are available up to 75%, enabling businesses to access substantial capital without large deposits. LTV refers to the ratio of the loan amount compared to the property's valuation. For example, a £750,000 loan on a £1 million commercial property would equate to a 75% LTV.
• Confidence - Having secured bridging funds in advance can provide businesses and investors with greater confidence and negotiating power when making offers or bids on commercial property deals. Knowing the finance is arranged removes uncertainties during negotiations.
• Asset Release - Bridging loans allow companies to unlock capital tied up in existing property assets which can then be used as working capital or re-invested elsewhere. Turning dormant assets into liquid funds enables more nimble and efficient use of business capital.
• Auctions - Auction purchases often require quick completions, sometimes within 28 days. Arranging a bridging loan in advance rather than waiting for slower mortgage finance ensures property investors can meet tight deadlines and avoid losing their deposit.
• Refurbishment - Refurbishing or renovating a commercial property can enhance rental income and capital value. Bridging loans allows companies to finance these improvement works quickly rather than wait months for traditional loans. This helps maximise returns from the investment.

What Properties Can Be Used for Business Bridging Loans?

The majority of commercial and business property types can be used as security for a bridging loan. For instance:

• Offices, industrial units, warehouses
• Retail stores, shopping centres
• Hotels, pubs, restaurants
• Clinics, surgeries, dental practices
• Nursing homes, care facilities
• Petrol stations, garages
• Farms and agricultural facilities

The property should be standing security in good condition, with strong tenant demand in the local area. Unusual or specialist assets may also be considered by some lenders on a case-by-case basis.

Both commercial freehold and leasehold properties are commonly used, provided the lease has sufficient length remaining.

At Clifton Private Finance, we can help get you in front of the best possible lender for your business bridging loan. We can ensure a swift application, and iron out any potential roadblocks or hiccups when it comes to securing finance.

Read our latest business bridging loan case study, in which we helped our clients secure property and land in Reading for development. 

Costs of Business Bridging Loans

It is important to know that bridging loans have higher interest rates than traditional mortgages. This is reflective of their short-term flexibility. Rates can start from around 0.5% per month.

Other costs include:

• Arrangement Fees - Typically 1-2% of the loan size
• Valuation Fees - From £200 for a basic valuation
• Legal Fees - £800+ for legal work by specialist solicitors
• Exit Fees - Can be charged if the loan is repaid early or refinanced
• Broker Fees – when using a broker, there is typically a small fee. Working with a broker helps get you access to better rates and specialist lenders.

Higher loan amounts over £1 million often attract cheaper rates due to economies of scale. Overall costs should be carefully compared between different lender options.

Give our Bridge loan calculator a try to get an indicative quote for a business bridging loan

How to Apply for a Business Bridging Loan

Applying can be very simple with the help of a broker, and there are a couple of steps to the process.

The process of applying for a business bridging loan typically involves appointing an experienced commercial finance broker early on. The broker will source the most suitable lenders and products based on your specific requirements and circumstances. They can handle the application and liaise with lenders on your behalf.

After a broker is appointed, a property valuation survey will be carried out by a surveyor to determine the maximum loan amount possible based on the asset's valuation. The lender will then undertake due diligence and underwriting, assessing factors such as your creditworthiness, the suitability of the property as security, your proposed exit strategy from the loan, and other key criteria.

If the lender approves the application, they will issue a loan offer outlining the interest rate, loan-to-value percentage, term length, and other conditions you must meet. Lawyers will then handle the legal conveyancing work required to transfer property deeds and register the loan correctly against the asset. Once contracts are signed by all parties, the lender will release the loan funds, which can be as quickly as 1 week from the initial application if an experienced broker is used.

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Are there Alternatives to Business Bridging Loans?

There are some other financing options that may work for certain business scenarios:

• Commercial Mortgages - Longer-term finance for commercial property purchase, but lacks speed.
• Asset Finance - Release cash from machinery, vehicles, equipment and other assets.
• Invoice Finance - Invoice finance is a funding option that enables businesses to secure a loan using their outstanding invoices as collateral. Essentially, this financial solution allows companies to borrow money based on the value of their unpaid invoices.
• Equity Release - Unlocking capital from property by remortgaging or selling a stake.
• Business Cash Advances - Unsecured lending repaid from future card or invoice payments.
• Crowdfunding - Raising smaller amounts from multiple investors. 

Looking for a Business Bridging Loan?

Need short-term finance for your business property transaction? At Clifton Private Finance, we can facilitate your business bridging loan through a number of specialist lenders across the entire market; lenders who are not typically available through the high street.

Whether you are a property developer, investor, or new to business bridging loans – we can get you a decision in principle quickly, for whatever your purposes are. With our expertise and depth of knowledge, we can find you an appropriate lender with favourable rates for your specific business requirements.

Don’t hesitate to get in contact at 0117 959 5094 to discuss your requirements for the ideal business bridging loan.

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FAQ

Can I get a business bridging loan to refinance existing commercial property finance?

Yes, you can use a business bridging loan to refinance existing commercial property finance. This can be a good option if you are looking to secure a lower interest rate or consolidate multiple loans into a single loan.

Are there restrictions on what the funds from a business bridging loan can be used for?

Yes, there are typically restrictions on how the funds from a business bridging loan can be used. The specific restrictions will vary from lender to lender, but they typically include restrictions on the following:

• Purchasing residential property
• Repaying personal debt
• Making investments in speculative ventures

Is it easy to switch lenders if I find a better rate elsewhere?

Yes, it is relatively easy to switch lenders if you find a better rate for your business bridging loan. However, there may be early repayment charges involved, so it is important to factor these into your decision.

What happens if property values decline and I can't repay the full loan amount?

If property values decline, you may find yourself in a position of negative equity, where the value of the property is less than the amount of the loan outstanding. In this situation, you may have difficulty refinancing the loan or selling the property to repay the debt. You may also be required to make additional payments to the lender to reduce the loan balance.

Can I get a bridging loan with bad credit?

While credit scores are considered, lenders often place more emphasis on the property being used as security. Many will lend to borrowers with prior credit issues.

Are business bridging loans regulated?

Regulation depends on the purpose. Loans for property investment are generally unregulated. Business loans for working capital may fall under FCA oversight.

 

Many lenders will allow term extensions, or refinancing to a new loan, provided the exit strategy remains viable. Extension fees often apply.