In the UK’s fast-moving commercial property landscape, the adage ‘time is money’ could not be more relevant. For a property investor in London, a developer in Manchester, or a business owner in any other part of the UK, having access to flexible and quick finance can either make or break a deal.
This is where a commercial bridging loan becomes useful, providing short-term funding where traditional methods fail.
What Is a Commercial Bridging Loan?
A commercial bridging loan is short-term to mid-term debt and is structured as a finance facility to assist UK investors and businesses to ‘bridge’ a pressing capital requirement against long-term funding or cash flow that will eventually supplant it. Usually, these loans are secured against commercial properties, land, or even mixed-use structures.
Bridging loans provide a commercial short-term solution, unlike conventional mortgages that use long-term funding, which makes them ideal for urgent or time-sensitive transactions.
UK Commercial Bridging Financing Loans’ Typical Scenarios
Bridging loans have a host of commercial applications, including:
Acquiring an auction deal:
Auctions can be completed in 28 days if funds are provided on short notice.
Refurbishment Projects:
Funding light and heavy refurbishment before refinancing onto a clear title commercial mortgage.
Property Chain Breaks:
Avoid the failure of a commercial transaction if there is a hold-up with the buyer’s funds.
Working Capital Boost:
Provide cash flow into the business regarding stock and equipment, or even tax liabilities.
Land Acquisition:
Buy land for development purposes even when there is no planning permission.
How Does a Commercial Bridging Loan Work in the UK?
Here is a typical structure for a UK commercial bridging loan:
Loan Term:
Normally, from 3 to 18 months, although some lenders go as far as offering 24 months.
Loan Amount:
Different by lender, though typically in the region of £50,000 to £25 million.
Security:
Secured against UK commercial or semi-commercial properties, which include offices, warehouses, shops, and land.
Loan-to-Value (LTV):
Usual is up to 70-75% of the current or future value of the property.
Interest:
Retained, rolled up, or serviced monthly, interest may be paid at face value, 0.7% -1.2% a month.
Exit Strategy:
A clear way to repay the loan is imperative, be it through sale, refinance, or business revenue.
Advantages of UK Commercial Bridging Finance
Speed:
Access within 3-10 days.
Flexibility:
Broad range of property types and business situationally bound.
Key Points Before Applying
Although flexibility is provided by bridging loans, they come with some danger. The following are some points that need to be considered by UK borrowers:
Greater Costs:
Greater interest fees compared to conventional loans.
Short Term Only:
For temporary use—never a long-term solution for finance.
Exit Needed:
Evidence of a viable and secure exit route will be required by lenders.
Legal and Valuation Fees:
These need to be included in the early stages to avoid any surprises.
Conclusion
Yet it is essential to take professional advice and engage with experienced lenders or brokers who know the intricacies of the UK commercial finance environment. This will ensure the terms are correct and the loan aligns with your long-term business aspirations.
Commercial bridging loans provide UK companies and property investors with a robust, short-term remedy for unlocking capital quickly, when timing is most critical.
