Bridging loans are a fast and flexible way of accessing financing quickly. Here Revolution Brokers will look at the most critical factors to consider when comparing bridging loan rates, and what you should expect from the bridge finance application process.
How quickly can I get a bridging loan?
The main advantage of bridging loans is that they can be processed very quickly. Straightforward applications can be completed inside of a week, although more complex cases might take longer.
Usually, you can expect to have an offer within a few days of your enquiry if you are working with a specialist broker like Revolution Finance Brokers, who understands the market and knows which lenders are best suited to your borrowing requirements.
How to speed up your bridging loan application
The application process will take longer with some lenders than others. While this is a form of fast finance, there are still eligibility criteria that you will need to meet to secure a funding offer.
We strongly recommend using a broker to understand which lenders are best suited to your needs, and with whom you will meet their lending criteria. This is important as, if you submit multiple applications, a high number of checks on your credit file might prevent some loan providers from making you an offer.
Call Revolution Brokers on 0330 304 3040, and let us know:
- How much you need to borrow.
- For how long.
- What the finances are required for.
We will streamline the application process to get a competitive funding offer on the table quickly.
How long is the bridging loan approval process?
If you have been extended an offer, or have a compelling application supported by all of the information, you can have your funding in place extremely quickly - in some cases, as soon as within 24 hours.
For other cases, it can take 48 hours.
There are lots of factors that dictate how long the approval takes. These include what you are borrowing for and the risk factors around your borrowing.
Applying for a bridge loan
The process of applying for a bridging loan with Revolution Brokers is fast and straightforward. Typically, the steps include:
- Your enquiry - let us know your borrowing needs, what the funds are for and what the circumstances are.
- An assessment - we work with you to understand your exit strategy, and to ensure that you have a solid plan in place.
- Identifying lenders - Revolution takes your application to the market to source the best lenders, and to present you with an agreement in principle (AIP) for you to review.
- Conditional offer - if you are happy with the offer, we will present you with a conditional offer. You do not have to accept this, but it allows you to prove that you have the lending in place, pending the terms and any documentation required.
- The application goes to legals for signatures, etc. Once all the due diligence checks are completed, the funds are released.
Factors impacting the speed of the bridging loan process
Each bridging loan application is different, and therefore there is no one size fits all model. Lenders will assess each application on its merit, considering factors such as:
- How stable the exit strategy is.
- What sort of bridging loan you are applying for - i.e. regulated or unregulated.
- Your credit scoring.
- What type of property you are purchasing.
- Your experience in the market.
- How much deposit is available.
- Whether the property has a recent valuation.
. Exit strategies for bridging loans
An exit strategy explains how you plan to repay the lending. This is important since a lender needs to understand that you will be able to pay back the borrowing and have a solid plan in place to do so.
If you have a healthy exit plan, you are far more likely to access your funding quickly and achieve competitive rates.
Should you plan to sell the property as your exit strategy, then valuations may be required to assess whether this will generate sufficient revenue to cover the loan.
Development bridging finance can be far more complex, and therefore a bridging loan for this purpose may take longer to arrange.
2. Regulated and unregulated bridge finance
There are two types of bridge finance - regulated and unregulated.
Regulated - usually offered to individual loan applicants borrowing against a residential property. Regulated bridging loans are overseen by the Financial Conduct Authority (FCA), so carry specific requirements to comply with those regulations.
Unregulated - rather than meaning 'unauthorised' as is often misunderstood, an unregulated bridging loan is simply the alternative to a residential bridge loan. This sort of bridge finance is the term used to describe commercial bridge lending, which has to be adapted to meet the needs of the borrower and their development project.
3. Credit rating and bridging finance
Having an adverse credit history can make it harder to achieve a competitive bridging loan offer. However, many specialist lenders will not consider this a significant factor, provided there is a strong exit strategy in place.
Some mainstream lenders are unable to extend offers to applicants with bad credit history at all. However, many specialist lenders will look at other criteria as the primary basis for their lending decisions.
If you are concerned about a bad credit rating impacting your ability to secure a bridging loan, give us a call on 0330 304 3040. Revolution Brokers work with a network of established lenders who will be able to extend offers to meet your bridge finance needs.
4. Types of property that can be financed through bridging loans
Most bridging loans are taken out to provide fast financing to secure the purchase of a property. They can also be taken out for other purposes, such as financing a development or borrowing quickly to be able to purchase a property at auction.
Different lenders have different requirements when it comes to the types of property they will and will not lend against.
Typically, borrowing against a commercial property can take slightly longer than residential. Some lenders will not lend against properties they consider higher risk, such as semi-commercial properties.
5. Property development experience
Bridge loans are available to new developers and investors. However, some lenders will require applicants to have a minimum number of years of experience.
If you can demonstrate a good track record and experience in the market, you are likely to find it easier to achieve competitive rates and turn around a fast bridging finance offer.
Maximum LTVs on bridging loans
Most bridging loans will offer an LTV of up to 70-75%. This means that you need to have a deposit of around 30-35% available to be able to purchase a property with this type of lending.
Higher risk properties - including commercial premises and sites such as petrol stations - may have a lower maximum LTV available. This tends to be up to around 50-60%.
You can secure bridging finance with a lower deposit, and some specialist bridge finance lenders will even offer up to a 100% LTV. In this scenario, they will usually need some additional security, or multiple securities held against other assets to ensure their lending is protected.
Bridging loans for buy to let properties
Bridging loans to support the investment in a BTL property are often called bridge to let applications.
This sort of lending is best accessed through a specialist lender who understands the buy to let property market and will be able to extend an AIP quickly.
Bridging loans for Ltd companies
Most businesses will at some time or another need a fast financing option, and when purchasing a property, it is certainly possible to secure a bridging loan. Your business will need to have a stable exit strategy in place to obtain this sort of lending.
The terms available from most lenders are similar to those offered to private applicants. Some lenders will require a personal guarantee from the Directors of the business.
Buy to let landlords often choose to set up their Ltd company as a Special Purpose Vehicle (SPV) - a company incorporated solely to manage the ownership of properties. In this scenario, you are likely to have a more extensive choice of lenders and be able to achieve more favourable interest rates.
Bridging finance expert advice
If you are considering applying for bridging finance, speak to Revolution Brokers today. With our vast network of UK specialist lenders, we achieve outstanding rates and negotiate for you to secure excellent terms adapted to meet your funding needs.
For fast bridging finance, give us a call today on 0330 304 3040.