Commercial Bridging
Bridging finance is a short-term finance tool used to “bridge” a gap while a longer-term solution is put in place. In the property industry in the UK, this is a widely adopted finance product used by investors and developers to buy properties at a speed with the aim of refurbishing it and then sell or refinance.
Here are some scenarios where bridging finance is a perfect fit:
The property may not be in a habitable condition for someone to live in. Bridging lenders will lend on these properties with no problem as long as the investor has refurbishment experience or have a team supporting them and can complete the project in time with right figures backing the project.
Change of Use – For higher income and yield, investors like to convert a standard residential property in to houses of multiple occupation or a commercial property to residential units. Bridging lenders love these conversions. They will fund the purchase and full refurbishment costs.
Buying a property (especially if it’s a good deal) before selling another.
Buying at auction – traditional lenders will not complete the purchase within auction timelines. Bridging finance is perfectly suited to complete in 28 days.
At times bridging finance is also used by individuals or business owners to raise extra cash to buy machinery, other types of assets, pay a VAT/tax loan, pay another liability or other areas where short term finance is required as long as this short-term finance is paid back on time.
Exit – The single most important factor any bridging lender will look at is the exit. They would like to ensure the borrower or the applicant has the means to repay the principal and interest during or at the end of the term.
Working with us, we take away this headache and ensure we have the exit secured at the outset before spending a lot of time and money. We will work with you to look at the project, your background, figures and assess if the project is profitable with healthy margins.
With our expertise within this market and using bridging finance on our own projects, we will ensure we get the right lender to back the project at the best available terms for you.
Typical terms:
- Interest Rate: From 0.75% pcm onwards
- Arrangement Fee: 2%
- Term: 1 to 12 months
- Loan to Value (LTV): Up to 80%
- Refurbishment Costs: Up to 100%
- Loan to Gross Development Value (LTGDV): 75%
- Interest payments can be retained (paid up-front), serviced monthly or rolled up and paid at the end.
- Legals and valuation costs separate (however dual representation solicitors possible with some lenders to save costs)