As a business owner, you will know that opportunity doesn’t always arrive at the most convenient of times. For example, a potential premises might come onto the market, and you might need to move quickly to secure it.
The only problem is that the money isn’t available right now. You could be waiting for your current property to sell, or you have longer-term finance that is still going through.
That’s where a bridging loan comes in.
A bridging loan gives you the short-term funding to complete the purchase while you wait for the money you plan to use. Once that money becomes available, the bridging loan is repaid.
That’s the basic idea behind bridging finance: it gives you a temporary way to fund a property purchase when timing is getting in the way.
That timing gap is one of the main reasons businesses use bridging finance.
If you have found the right premises but your commercial mortgage is still being arranged, commercial bridging finance can help you complete the purchase without waiting for the longer-term funding to come through.
It can also be useful at auction, where completion deadlines are much shorter and there may not be enough time to arrange a standard mortgage.
In both cases, a bridging loan gives you the funds to move ahead now, then repay the loan once your longer-term finance is in place.
Bridging finance isn’t only for buying property. If you already own a property - be that commercial or buy-to-let property, you may be able to borrow against it to raise funds.
You might use that money to invest in another property or pay for refurbishment work. It can also help if you have a large tax bill due or need extra cash for your business while you wait for another source of funds to come through.
In those situations, a bridging loan can provide quick business funding without having to sell the property you already own.
A property doesn’t always meet the requirements of a long-term lender on day one.
Commercial premises might need refurbishment before a mortgage lender is prepared to lend against it. A bridging loan can be used during that period, giving you the time to complete the work before refinancing.
Bridging can also cover heavier refurbishment in the right circumstances. Some bridging lenders will even allow money for the works to be drawn in stages as the project progresses.
That can make bridging useful beyond straightforward purchases. The important distinction is whether the project and the planned exit fit the lender’s criteria.
For larger schemes, development finance may still be the better route.
Bridging finance is known for moving quickly, but the lender still needs enough information to make a decision and progress the loan.
They will want to understand the property being used as security and how you plan to repay the bridging loan. The legal work also needs to be completed before the funds can be released.
If you are looking for fast business loans, choosing the right lender from the outset can make a real difference. This is where working with a bridging finance broker can help, as they can approach lenders that are most suited to your application, rather than wasting time in the wrong place.
Because bridging is short-term borrowing, the repayment plan cannot be an afterthought.
A business might intend to refinance once the property is ready for longer-term lending. Another borrower may be waiting for a property sale to complete. Both can be perfectly valid exits, but they need to stand up.
If refinancing is the plan, it is worth checking that the next stage of finance looks realistic before taking out the bridging loan. Where the exit relies on a sale, the loan term needs to give that transaction enough time to complete.
Bridging finance can solve a timing issue but it works best when there is a clear answer to what happens next.
The same timing problem can arise when buying a home.
A bridging loan for home purchase can sometimes help where someone needs to complete on a new property before receiving the proceeds from their current one.
It can also be used where a property needs work before a mainstream mortgage becomes an option.
As with commercial bridging finance, the loan is intended to be temporary. You still need a credible way to repay it once that temporary gap has been dealt with.
There is a wide range of bridging lenders in the UK, and they do not all look for the same type of deal.
One lender may be comfortable with refurbishment, while another might prefer a straightforward purchase.
Some are better suited to cases where the completion date is especially tight. The right lender is not always the one with the lowest headline rate or a name you already recognise.
A broker can look at your application and identify a lender whose criteria match what you are trying to achieve. This can avoid you losing valuable time approaching lenders that were unlikely to consider the case in the first place.
Bridging finance can be useful when you need access to funds sooner than your longer-term plans allow. Phoenix Commercial Finance works with bridging lenders across the whole of the UK market. If you need funding against a property and timing is becoming an issue, talk to us and we can look at the options available.
If you would like a no-obligation conversation about what is available to you right now, chat with us on WhatsApp or fill in our no-obligation quick enquiry form and a member of the team will be in touch with you shortly.
