Commercial Bridging Loan Facts

Commercial bridge loans are short-term forms of finance that can be used to secure funds quickly for the purchase or renovation of commercial property or land. Most commonly used by business owners, investors, landlords & developers, they provide speedy access to finance for commercial spaces.

Bridging loans for commercial property tend to be more specialist than loans secured against residential property, due to the greater risk that non-residential properties pose to lenders. This means that there are fewer lenders in the market & loans for commercial purposes are usually more expensive.  

Rates for commercial bridge loans are dependent on a number of different factors, however the minimum monthly interest rate borrowers should expect to pay is from 0.44%.

We specialise in comparing the best deals available across the market for commercial bridge loans & you can get one of our experts to call you to discuss your requirements by completing our Quick Enquiry form here. 

What can a commercial bridge loans be used for?

Bridging loans for commercial property can be used to purchase or fund the renovation of a wide range of commercial spaces. From farms & agricultural buildings to care homes & industrial parks, the list is endless. Whatever the property is there will more than likely be a lender happy to help. 

In many cases, a commercial bridge loan can also be used to purchase land for re-development work & in ‘change-of-use’ projects where a building is repurposed from one business use to another. 

One of the key benefits of a commercial bridge loan is that they provide speedy finance for borrowers looking to complete a purchase or renovation project quickly. Funds can be with you within days or week, not the much longer timescale associated with other forms of finance.

Commercial bridge loans are usually associated with commercial property purchases, however they can be used for other purposes as well, such as:

• Cashflow
• Business expansion
• Paying VAT/Tax
• Clearing invoices
• & virtually anything else (so long as there is sufficient commercial property to secure against)

They are very flexible loans, available quickly, & if you want to see if you can apply for one then our team of commercial bridging loan specialists could get you a same day in principle approval.

How is a commercial bridge loan secured & how much can be borrowed?

In order to obtain a commercial bridging finance a lender will need some form of security from the borrower, which will typically be the property or land that is being purchased or refurbished, if that is what the loan is being used for. If the commercial bridge loan has been taken out for any other reason then other commercial property/land owned by the borrower will be needed as security.

The amount available to borrow is usually a maximum of 70% of the value of the commercial property. If more money than this is needed, then additional assets would have to be provided as further security.

The level of security on offer will determine the level of risk associated with the loan, which then determines the available interest rate. This applies regardless of whether the owner intends to use the property to trade from, rent out to other businesses or sell the property on to other businesses. 

To see how much your loan will cost please use our handy loan commercial bridging loan calculator.

How do borrowers pay back a commercial bridging finance loan?

The maximum length of a commercial bridge loan is 24 months & during that time the borrower usually makes no monthly repayments to the lender, unlike many other types of secured loan. Instead, the lender calculates the interest payable & adds this to the loan amount giving the full amount that the borrower is required to pay back in full on or before the expiry date of the loan. 

Lenders may wish to take first or second charges on bridging loans which are secured against commercial property. A first charge is the primary loan secured against the property which takes priority over all other forms of finance secured against the same property – this is the form of charge that many buyers will be most familiar with.

When it comes to repaying a commercial bridge loan, the lender will need to know how the borrower intends to pay the money back – otherwise known as an ‘exit strategy’. 

The exit strategies most often used on a first charge commercial bridge loan include securing a commercial occupier mortgage on the premises, securing a commercial buy-to-let mortgage on the premises – with the intention of letting this out to other businesses, or selling the premises on the open market. The borrower can then use the proceeds from the securing of a mortgage, or from the sale of the property to pay off the outstanding balance on the bridging loan.

For a second charge commercial bridge loan, the standard exits are generally receipt of significant revenue from other sources. These could include an expected income from customers, money received in a will or through sale of property in a will, the sale of another property owned by the business, sale of other investments or arrangement of another form of finance to repay the bridging loan balance. 

Does it matter if the borrower has a bad credit history?

The key factor in securing a commercial bridge loan is evidence that a clear exit strategy is in place. In fact, this is far more important to a commercial bridging finance lender than a borrower’s credit history. For example – if the loan is intended to buy a property to restore then re-sell at a profit – this would be acceptable to a bridging lender, regardless of a poor credit history or series of debts. 

Only in instances where the applicant has an extremely poor credit history & is planning to re-finance once the property is finished, might the lender require evidence that future re-finance is possible or other possible exit strategies are in place.

Apply for your commercial bridging loan now

We have decades of experience in arranging commercial bridging finance & know which types of applications to place with which lender to achieve the most economical finance for you. Try us out - save time, save money & get super-fast help securing your commercial bridging finance by calling us on 01202 612934 or completing our Quick Enquiry form today.