Bridging Loans

Helping Businesses

Fast cash, which grows with your business.

Bridging loans are a form of fast, flexible short-term lending, usually for 12 months or less, which can be used by individuals or businesses. They are sometimes referred to as swing loans or gap finance.

The loan can be used to ‘bridge’ the gap in your finances until either a long-term financing solution can be put in place or alternative funds are received from another source, for example the sale of an asset.

At Compare Your Funding we have helped hundreds of customers get bridging finance for their projects, so get in touch with our experts if you are considering this funding facility.

They are fast to arrange and allow the flexibility to enable you to take advantage of an opportunity that has arisen or obtain a quick cash injection if that is required.

They can be used when you are buying a new business, commercial property, or part commercial/part residential property. They cover most commercial property purchases apart from house boats.

The reason you may need one could be that the purchase is for brownfield sites before planning approval is given, run down commercial premises that are difficult to obtain a mortgage for, or funding for a new small business or start-up.

They are a really fast and often crucial form of funding for many reasons, including to:
– Raise finance quickly or raise a deposit for purchasing a property
– Refurbish a property
– Complete a development
– Purchase a property at auction, or one in a condition which would not get a mortgage with a mainstream lender
– Bridge a shortfall of funding between buying and selling property when a sale is delayed

Bridging loans can be arranged within a matter of hours with funds released within 72 hours although usually this takes a bit longer and can take a couple of weeks. While a bridging loan may be arranged much quicker than could be achieved through a traditional bank, most bridging finance companies still apply sensible and relatively conservative lending criteria. Usually such lenders are smaller nimble operations and specialise in doing all the usual checks that a bank will do but without the encumbrance of bank bureaucracy.

The term of the loan can be as short as one day usually up to a maximum of 12 months. Loan amounts generally start at around £25,000 with no maximum.

Short-term finance is always more expensive than longer term lending but it is a highly competitive market and great deals can be found when comparing lenders. Interest rates will depend on the proposition in question and the amount of risk it carries. They can range from around 0.7-1.5% per month, increasing with the difficult propositions. There may also be other fees to pay but will depend on the charging structure of the selected lender. For example

  • Surveyors fees
  • Legal fees (in many cases lenders have in-house lawyers and their costs may be included within the lender’s arrangement fees)
  • Exit fees

It is essential to establish a clear exit strategy to ensure the loan can be repaid (either via sale or remortgage) to avoid paying high penalty interest rates and possibly losing the property to repossession if the loan cannot be repaid. As long as you have this you can use the money released in a number of ways. You could inject working capital to cover short term cashflow issues for example.

For landlords, or a landlord company, the exit strategy would usually be to refinance the loan onto a buy to let mortgage, typically after doing some renovations to make the property suitable for rental.

For commercial units, the exit strategy usually involves refurbishing the unit then selling it or refinancing onto a conventional commercial mortgage.

There have been many new lenders coming to this market and with so many to choose from it is hard to know where to begin or what to do for the best.

It is such a specialist area it is always advisable to use a broker – particularly as some lenders only operate through brokering partners. A broker, like us here at Compare Your Funding will take time to understand the property, its location, the borrower’s circumstances, and funding requirements and be best placed to match these components with the most suitable lender.

Still not sure if bridging loans are right for your business?

If this is the case, there are other options available to you.  Have a look at our product pages:

Our experts work hard to negotiate you the best deal and are with you, side by side, from your first enquiry through to renewals and beyond.
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