What Can A Commercial Bridging Loan Be Used For?

Commercial property comes in a range of shapes & sizes – from farms to factories, car parks to care homes. For those in the business of buying, selling & managing these types of property, commercial bridging loans are a vital way to quickly secure short-term finance which is secured against the borrower’s assets.

What Are The Benefits Of A Commercial Bridging Loan

Commercial bridge loans offer a wealth of benefits to prospective borrowers. Some of the key benefits are the size & speed of the loans on offer. It’s often possible to secure a loan amount of up to £25 million, with a decision made within just 24 hours after application. 

Additionally when it comes to repayments, the loan terms are very flexible with durations lasting from 3 up to 24 months 

How Much Do Bridging Loans For Commercial Property Cost

Interest rates on commercial bridge loans can start from as low as 0.44% per month on a retained interest basis. Because these are specialist loans, it is important to go to a specialist lender or broker for the most competitive rates. 

To get a personalised quote today, contact us on 01202 613934, complete our Quick Enquiry form or use our simple, online Commercial Bridging Loan calculator.

Does It matter If The Borrower Has A Poor Credit Rating

Even borrowers with poor or no credit history are often eligible for commercial bridging finance as security can be in the form of business assets or equity in other property. They key criteria for most lenders is ensuring that the borrower can meet repayments when they are due & that they have presented a strong application for the finance, backed with the appropriate amount of security. 

How Are Commercial Bridging Loans Secured

Commercial bridging finance can be secured against a vast range of commercial property, semi-commercial property & land. What’s key is that the borrower either owns these assets outright or owns sufficient equity in the assets for the amount of money they wish to borrow.

Examples of suitable commercial property which could be used as security include restaurants, shops, care homes, hotels, warehouses, offices & factories. 

Even semi-commercial property such as public houses, which contain a mixture of both residential and commercial space can qualify as suitable security for commercial bridging finance. 

Suitable land for security includes agricultural land, farm land, development land & land without planning permission.

In situations where the developer wishes to purchase commercial property using a bridging loan, the lender will take a first charge over the property.  This happens regardless of whether the developer intends to use the property to trade from, renovate for re-sale or rental, or change the property use for re-sale or rental. If the developer is looking to use current commercial property as security against the loan, & the loan will not be used to buy more property, the lender will then take out a second charge.

Does Planning Permission Need To Be In Place

It’s always important to check whether planning permission forms part of the sale. In situations where the change to the property is a permitted development, commercial bridging finance is ideal. Some examples of these include change of to business premises, change of use from office to residential space, change of use of agricultural buildings & re-use of existing commercial spaces.

When Can Commercial Bridge Loans Be Used For

Commercial bridge loans are popular forms of finance for property developers who are looking to quickly purchase a property or land. The funds from the loan can be used flexibly, either as a deposit on the sale or to pay outright for the assets. One of the key benefits of commercial bridging finance is the speed with which it can be delivered – often within a matter of days.

Here are some typical examples of how this finance is employed:

Commercial Bridging Loans For Renovation Work

In cases where developers are looking to renovate & convert a commercial property which is in poor condition, a commercial bridging loan can be used to cover the cost of this work as well as the cost of the purchase. 

This is a popular option for developers who are looking to convert premises into modern business or residential space, for future rental or re-sale. The finance arrangements on offer typically provide up to one year to complete the building work. 

The same conditions apply to developers will look use commercial bridging to purchase greenfield or brownfield land with the aim of converting the space into housing, retail or business premises.  

Commercial Bridging Loans For Further Investment

Releasing equity within existing commercial premises can be a smart way to invest in other parts of the business, or to help raise funds. Commercial bridging loans can be used for working capital purposes which enable the purchase of business assets, plants & machinery when there is not the available time to find financing through other routes.

Commercial Bridging Loans For The Purchase Of Business Premises

Commercial bridging is commonly used by current owners of commercial property who are looking to expand their portfolio and purchase further property or land. These spaces can then be used either to trade from themselves or as refurbishment projects to be rented out to future commercial tenants. In these scenarios, once derelict premises have been refurbished & rented out for example, its value is likely to rise, making a standard commercial mortgage an option for the long term.

Commercial Bridging Loans For Auction Purchases

Commercial property purchases at auction move far more quickly that those which follow the traditional sales model. For that reason, it’s vitally important for finance to be secured before the buyer enters the auction house, so that they can meet the 28-day deadline with is normally required by vendors at auction. 

Bridging loans are a great way to secure these purchases quickly & ensure a smooth sale at auction. 

Commercial Bridging Loans For Residential Property Purchases

Commercial property owners who are looking to buy residential property have the option of releasing equity within the business premises provide funding for the purchase. 

When time is of the essence & a fast sale is needed, a bridging loan can provide swift funds to make this happen – especially in situations where the buyers is under pressure from the seller to complete the purchase. 

Commercial Bridging Loans For Payment Of Debts

Commercial bridging finance can be a useful, short term way for borrower to secure funding to cover their debts. 

Examples of these scenarios include redemption of assets, repayments to creditors, halting of repossessions, prevention of business insolvency, replacing a previous bridging loan which is about to expire, end of term mortgage payments, tax payments, consolidation of debt & the redemption of an existing business loan.

So long as the lender can see that you can commit security to enable the loan to go ahead, then what you use it for is essentially up to you.

What Is An Exit Strategy?

From the outset, it is important to identify & agree a clear exit strategy when applying for a commercial bridge loan. On first charge loans, the accepted methods for exit from the finance arrangement might include:

• arranging another loan on the property which can be used to pay back the loan before that point at which it expires
• arrangement the sale of the property to a buyer within an agreed timeframe

For second charge commercial bridge loans, suitable exit strategies might include:

• the sale of another property owned by the developer
• the sale of shares listed on the stock exchange
• the sale of other investments
• expected revenue from a third party source
• arranging another loan on the property which can be used to pay back the loan before that point at which it expires

Use A Broker To Arrange The Best Deal

Our team has decades of experience in arranging commercial bridging finance & have brokered over £200m in financing over the last 12 months.

Our approach is to scan the entire bridging loan market & match the borrower with the best possible lender & the best possible product. This tailored process provides all parties with the peace of mind that that they are securing the best possible arrangement on the market. 

Each lender will set its own criteria about the size of the loan they are prepared to offer, & the types of security they are willing to accept – so it’s important to do a thorough scan of the market & identify the best possible deals.

In addition, the application process for funding can be rigorous & complicated. If you use us, we will work with an underwriter to ensure that your proposal is as appealing as possible to the lender, therefore maximising the opportunities of a successful result. 

We have strong relationships with a huge range of lenders & it is highly likely will be able to secure a deal that is far more competitive than one you may have searched for yourself.

To see our indicative bridging loan rates & costs you can use our bridging loan calculator here. 

Want to find out more? Please call us on 01202 612934 or fill in our Quick Enquiry form to see how we can help you.