Properties such as hotels and care homes are key investments where bridging finance can help - and here we'll run through when this funding option might be the best option.
Some of the common uses include:
- Financing renovations or expansions to existing businesses.
- Investing in new hotel businesses to add to your assets.
- Development of a new or existing hotel property.
- Finalising an investment deal where time is of the essence.
We'll explain each of these scenarios, and where bridging finance fits it - as well as how to get the best rates!
If you'd like professional advice from an independent broker, give us a call on 0330 304 3040, or drop a message to info@revolutionbrokers.co.uk.
Uses of Hotel Bridging Loans
Let's expand a little on the four examples given above.
- Even profitable long-standing hoteliers might struggle to raise the kind of finance needed for an extensive renovation for renovations. Bridging finance is also fast, so if you need to carry out essential repairs, or renovate quickly in the off-season, it's a viable option. You can take out short-term bridge finance for a few months and remortgage when the work is complete to pay back the loan.
- Bridge loans are also used to invest in new businesses, and allow you to complete a deal quickly. You can then take your time to finalise a commercial remortgage, with the new property safely added to your portfolio.
- Development projects are often financed either through bridging finance or development finance. Both options offer fast capital for new builds, or where you need to develop a dilapidated building that isn't mortgageable in its current condition.
Can I Get Bridging Finance for a Care Home?
You can, and most lenders who offer hotel bridge loans will also cater to the care sector. Similar reasons apply:
- Investing in a care home business.
- Financing a refurbishment or upgrade.
- Developing a run-down building into a care home facility.
- Buying a new property to add to a care home portfolio.
What are the Benefits of Bridge Loans Over Commercial Mortgages?
Bridge finance is faster and more flexible than a mortgage, and so is a way to raise capital when you need to move quickly - that might be buying a business or property at auction, for example.
Some properties are uninhabitable, and therefore ineligible for a mortgage. In this case, a bridge loan allows you to carry out the renovation works, and then remortgage once the property is in a habitable condition.
What is the Difference in a Hotel or Care Home Bridge Loan and a Residential Bridge?
The critical difference is that commercial bridging loans are bespoke, and therefore unregulated. Not every lender provides this type of short-term financing, and you could be asked to:
- Provide legal checks to verify that licensing is in place.
- Evidence the stability of your exit strategy.
- Show a business plan demonstrating that the project is viable.
- Accept higher valuation fees or rates on commercial bridge loans.
Residential bridge loans for a home you wish to live in are regulated by the Financial Conduct Authority, overseeing factors such as rules for selling and providing independent advice.
Commercial loans fall outside of this category, and therefore rates and terms can vary significantly between lenders.
What LTV Can I Borrow on a Bridge Loan for a Hotel or Care Home?
Most commercial bridge finance lenders will offer LTVs capped at 70% or 75%, so you'll usually need at least a 25% or 30% deposit.
You can get a higher LTV with additional security, but if the project is considered a higher risk, you might need to provide a deposit of 50%.
What are the Eligibility Criteria for a Care Home or Hotel Bridging Loan?
Lenders will look at several factors before offering to lend:
- The exit strategy is essential and usually will mean selling the property (or another asset) or remortgaging. Lenders will want to see proof that this exit strategy is viable, such as an expected valuation, or agreement in principle to remortgage.
- Credit scoring is carried out, as any bad credit issues will pose a higher risk factor. That doesn't mean you won't be able to find a lender, but that the rates quoted will be higher.
- Commercial experience in the sector and experience of similar investment projects is a benefit, as this shows the lender that you are likely to complete the project successfully.
- Your security will also be assessed, and whether the bridge is secured as a first or second charge.
- The higher a deposit you can offer, the lower the risk level, and the better the rates you will be provided - as well as increasing your chances of approval.
Expert Advice with Bridge Loans for Hotels and Care Homes
Commercial finance is a specialist area. The best way to find competitive financing is to consult an experienced, whole-of-market broker who can negotiate lending with the most suitable lenders.
Contact Revolution on 0330 304 3040, or send us an email to info@revolutionbrokers.co.uk to arrange a good time to talk about your capital requirements.
