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Commercial Bridging Finance
Commercial bridge loans are an alternative borrowing option for many business deals - and it is essential to ensure you get the best offers out there!
Here the Revolution Brokers team summarises some of the most common questions we receive about business bridge loans. If you would like to make an application or compare the rates available on the market, give us a call on 0330 304 3040, or drop a message to [email protected].
How Do Business Bridge Loans Works?
Commercial bridge loans work just like any other. This lending is short-term, interest-only, and more flexible, so it is ideal for projects such as purchasing a property to develop.
Your bridging finance is deemed a commercial product if you purchase any property with at least 40% of business premises. Therefore, if a building has some residential use and some commercial, you'll need at least 40% of the site to be commercial to apply.
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What are the Interest Terms on Commercial Bridge Finance?
There are a few different ways lenders calculate commercial bridge loan interest.
Loans are interest-only, so you can pay that interest each month, and pay back the original loan value at the end of the term. Alternatively, the interest can be rolled up, making a total balance repayable of the original loan, plus the accrued interest.
Deferred bridge loans mean that you borrow the total interest cost from the lender for a defined term, and then repay the balance at the end.
Which UK Lenders Offer Commercial Bridge Lending?
Commercial bridge loans are unregulated, and it's essential to find a lender with the right eligibility criteria.
Unregulated simply means that each loan is agreed on a case-by-case basis, so there isn't anything dubious about this type of borrowing!
What are the Deposit Requirements on Commercial Bridge Loans?
Generally, you'll need a deposit of at least 30% to 35% - although if the deal is higher risk, you might need up to 50% depending on the lender's LTV caps.
If you have substantial security, you might be able to secure a 100% commercial bridge loan, although personal guarantees will almost certainly be required.
How Long are the Repayment Terms on Business Bridging Loans?
Most bridge loans run for a year or just a few months.
You can get a longer-term, with the maximum usually being around three years.
How Can I Get the Lowest Interest Rates on Business Bridge Borrowing?
Lenders tend to assess the risk of each application on a case-by-case basis. Applications offered the best interest rates will meet these criteria:
- Having a strong exit strategy, with a clear value that exceeds the loan, and presents an easy to sell asset in a repossession scenario.
- Satisfactory credit history with no record of adverse issues.
- Strong experience in commercial property development.
- Substantial deposit of 40% or above.
- Healthy security, mitigating the lender's risk.
Is a Business Plan Mandatory for Business Bridging Loans?
Not always, no. A business plan is a good idea if there are any risk factors to the development, and some lenders will require one as standard.
Can I Get a Business Bridging Loan for any Property Development?
There aren't any properties with a blanket refusal - but each lender will have its own policies about what they will and won't lend against.
Many bridge loan providers steer clear of particular property types they deem higher risk, such as petrol stations.
Can I Get a Business Bridging Loan on an Unmortgageable Property?
Yes! Bridge loans are unregulated, and often the best option for a property that isn’t considered mortgageable in its current condition.
For example, you could buy a new business premises in a dilapidated state, renovate it and then remortgage - and achieve a property worth far more than its original purchase price, and use the remortgage proceeds to pay back the bridging loan.
What Sort of Business Bridge Loans are Available?
You can take out a bridge loan against any type of company, and for any purposes, provided the lender is confident your exit strategy is viable.
Limited company bridging loans are offered at similar rates to standard bridge loans, and many lenders will ask for personal guarantees from the directors.
Special Purpose Vehicle companies are often created for specific development projects, and most commercial bridging loan lenders will be happy to lend.
Second-charge commercial bridging loans are also available; although you'll need to closely meet the eligibility criteria and generally require a higher deposit.
Expert Advice on UK Commercial Bridging Loans
Our whole-of-market, independent teams have years of experience negotiating commercial bridge lending and will ensure you get a deal on the table as quickly as possible.
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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.
We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.