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Bridging Loans for Commercial Mortgages

Bridging loans can be a highly beneficial lending product – but what can you use a commercial bridging loan for, and what sort of interest rates should you expect to pay?

Bridging Loans for Commercial Mortgages

With so many borrowing options for businesses, commercial bridging loans are another potential solution to consider, when you are analysing mortgage choices.

Mortgage brokers works with thousands of businesses and investors who have been unable to find the lending they need from mainstream providers, or who need independent advice before committing to a significant company investment.

If you need bespoke advice and recommendations on whether a commercial bridging loan is the best solution for you, give us a call on 0330 304 3040 or email at [email protected].

What Are Bridging Loans for Commercial Mortgages?

A bridging loan is a short-term form of lending, ideal when a fast transaction is essential. Business bridging mortgages are in effect still a short-term loan, usually refinanced by a mortgage as the exit strategy.

Usually, a company will take out the bridge loan as a stopgap until they are in a position to apply for lower-cost, longer-term funding.

Commercial Mortgage Calculator

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Error: Property must be valued at £50,000 or more.

Error: Estimated rental income must be between £1 and £99,999.

Based on your details, you can borrow up to: £0

This calculator is an estimation of how much you could borrow. If you’re ready to take out a mortgage, speak to a Revolution brokers to see what options are available.

When Are Bridging Loans for Commercial Property Used?

One of the key reasons why businesses use bridge loans is because they need a fast, flexible form of financing and either don't have the time or the right eligibility to be able to secure a mortgage.

For example, if you need to quickly purchase a trading premise or property at auction and don't have the time to set up a commercial mortgage, a bridging loan is a much speedier option.

Bridge loans are charged at higher interest rates, and lenders will need to understand the exit strategy to repay the debt at the end of the term.

That means you can't swap a conventional commercial mortgage for a bridging loan altogether but can use the short-term form of finance as a bridge between your requirements and longer-term financial planning.

In many cases, the exit strategy is to remortgage, refinance, or sell the property.

What are the Terms on a Commercial Bridging Loan?

Generally, a bridging loan will run from as little as six months and up to three years as a maximum.

When can Bridging Loan Help with Business Mortgaging?

There are lots of reasons why a bridging loan might be an excellent solution for your business mortgage.

Perhaps you have been turned down by your mortgage lender, need faster financing than is available, or require a flexible solution to facilitate business investment.

The flexibility of a bridging loan means businesses can use it in multiple scenarios. In the next section, we'll run through some examples, but bridge finance is often the most effective solution for a property development project.

Say you were investing in a commercial rental site that required significant development. You wouldn't be likely to get competitive terms on a commercial mortgage - if any at all - because it would be a high-risk scenario and potentially very difficult to assess the future retail value of the development.

You can use a bridging loan to finance the cost of the development works and up to a proportion of the original investment cost and refinance later when the development has completed.

What Situations are Commercial Bridge Loans Best Suited to?

Here are some of the most common scenarios when the Revolution Brokers team secure a bridging loan for commercial clients:

  • Buying premises at auction. Auctions need a fast turnaround with financing, usually with a 28-day limit to remit the funds. Mortgages can take significantly longer, and so bridging lending can pay the balance in good time.
  • Properties that cannot be mortgaged. In many cases, a business is purchasing a property requiring significant renovations, and a mortgage provider cannot offer long-term lending. Bridge finance can fund the upgrades, and be paid back via a mortgage once construction is complete.
  • To provide a break in a property chain. If you need to sell existing premises to buy a new site, you might find that chains create time delays. Bridging loans enable you to go ahead with your new investment, without needing to wait for the old property to sell.
  • Issues with mortgage eligibility. If you have credit issues or cash flow challenges that make it challenging to secure a mortgage, a bridging loan is usually more flexible when it comes to lending policies. If you expect those issues to be resolved shortly, you can use a bridging loan in the interim.

What are the Eligibility Criteria for Bridging Loans for Commercial Property?

Some lenders will offer a bridging loan, as well as a mortgage to take over the finance once a particular stage of the project is completed.

It is always advisable to consult an independent broker, who can analyse the viability of both products separately, to make sure you aren't paying over the odds.

Lenders will consider:

  • Your exit strategy, looking for a sure-fire way that the bridging loan will be paid back at the end of the term.
  • Your experience and business stability.
  • How your credit score looks, and whether you have any adverse credit issues to factor in.
  • What deposit or security is on offer. Most lenders need around a 30% deposit for a bridging loan, with 20-40% deposits required for commercial mortgages.
  • The business profits, to demonstrate whether you have the finances in place to keep up with repayments.

Suppose you don't match with all of the lending criteria. In that case, you can still secure the right financing by consulting the Revolution Brokers team, as experts in unusual and unique commercial financing situations.

Our niche and specialist lenders offer flexible approaches and off-market products that can ensure your investment plans can proceed, even where a mainstream lender cannot help.

Is There a Minimum Value for Business Bridging Lending?

Typically, yes, most lenders will have a minimum on their commercial lending products:

  • Bridging loans tend to start at £30,000 or £50,000.
  • Commercial mortgages tend to start at £26,000.
  • A business loan usually finances borrowing of £25,000 or less.

Is a Commercial Bridging Loan for Property Development Safe?

One of the common queries is that, since commercial lending is often unregulated, businesses need to practice due diligence in ensuring they only take out borrowing from a reputable and respected lender.

Unregulated means that the product is bespoke, so this doesn't mean that it doesn't comply with lending policies. Our lenders use a self-regulation system, and the Revolution consultants can always explain the terms and pros and cons of unregulated lending.

What are the Risks of Taking out a Commercial Bridging Mortgage?

There are always risks with any lending, and you must understand these before going ahead:

  • If you fail to repay a bridging loan on time, your property could be repossessed.
  • If you refinance your bridging loan outside of the original terms, you may be liable for additional charges.
  • The FCA does not regulate bridging loans, so there is a lower chance of compensation if issues arise.
  • Interest rates on bridge lending are higher than on other forms of borrowing.

Should you be considering a bridge loan but be concerned about the risks involved, give us a call on 0330 304 3040, and we will run through the options available.

How Do I Apply for a Commercial Bridging Loan for Property Development?

Where you need fast, competitive finance, you are advised to contact an independent whole-of-market broker who isn't tied into any specific brand or lender. We can create a blended deal with both bridging finance and a mortgage offer to streamline your investment.

Professional Advice with Commercial Bridging Loans and Mortgages

It is essential to weigh up the pros and cons of the alternative financing options and to use a broker with the experience to negotiate favourable rates and terms on your behalf before applying for any form of commercial lending.

For tailored advice and bespoke recommendations, contact Revolution Brokers at 0330 304 3040 or drop us a message to [email protected].

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