What is a bridging loan?

Bridging Loans are normally taken out for periods of 1 – 12 months when you have a short-term funding requirement or you need to raise capital quickly. Developers & investors have been using bridging loans for years to take advantage of market conditions or undervalued assets. Being able to purchase a property quickly offers many advantages such as negotiating the best price and completing a deal before your competitors.

About residential bridging finance

A residential bridging loan is a loan secured on a residential property which is not generally the borrower’s main domestic residence. Where 40% of the property is used by the main borrower or an immediate member of their family, this is a regulated mortgage contract.

A common use of a Bridging Loan is where investors wish to purchase a property at auction. Buyers usually have 4 weeks to complete the purchase from the day of the auction. Where a mortgage lender risks losing the buyer’s deposit by not completing the application in time, Bridging Finance can be used to give the buyer a bit more breathing space.

Residential Bridging can be used in:

  • Opportunties to purchase properties at "Under-Value"
  • Auction Purchases
  • Property Refurbishments
  • Short-term Capital Release
  • Deals that need to be completed quickly
  • Acquitistions which involve a planning change

About commercial bridging finance

Commercial bridging finance is a short-term method of finance that can be arranged quickly and has the advantage of very flexible lending criteria. The main requirement for a commercial bridging loan is enough equity in one or more commercial properties to provide security. 

Commercial bridging loans are useful because they can quickly provide large amounts of short-term capital. This makes them useful for funding quick acquisitions when an opportunity presents itself. They are also used by businesses to provide cash injections to cover short-term cash flow problems and to provide funds for the materials, labour and equipment required to fulfil large orders. When funds are urgently required to solve a problem, commercial bridging loans are often used to clear pressing tax demands, repair or replace broken equipment or machinery, and are increasingly required to provide alternative finance when existing credit facilities such as overdrafts are reduced or withdrawn completely.

Businesses use commercial bridging loans for many different reasons, including:

  • Making quick purchases of low priced property or other assets
  • Providing the capital required to fulfil a large order
  • Bridging a gap in cash flow when a large client is late paying
  • Providing a cash injection for the business
  • Paying urgent tax demands

 

About development bridging finance

Construction and development projects of all sizes need funding, which is usually provided through the use of development finance. For property development and construction projects development finance is usually the preferred funding method because it is specifically designed for this use.

A development loan can help fund the purchase of the land or existing property to be developed and then provide the finance for the construction or restoration work. The amount of capital that can be raised is based on the value of the security. The benefit with property development finance is that as the project develops and its value increases more capital can be made available to continue funding the construction or restoration work. Because funds can be released in stages and as required it also helps keep the finance costs down as interest is only charged on money that has been received.

Property development finance can be used to fund a huge variety projects types and sizes. This includes funding the renovation of derelict houses, building a new single house from scratch, large new housing developments, property conversions, apartment or flat developments, on single retail units to whole retail parks, hotels, office blocks and care homes.

Similar to bridging finance, development loans are only intended to be short term methods of finance and would prove to be very expensive over the long term. Once a project is finished it should either be sold or refinanced using a long term finance facility in order to repay the development loan.

Development Finance can be used for:

  • Residential property development
  • Commercial property development
  • Extensions to property
  • Renovation or restoration of property
  • Property conversions
  • Modernisation of property

Talk to us today about Bridging Finance

Criteria for an Intelligent Bridging Loan:

  Min Max
Loan Amount £25,000 £5,000,000
Term 1 Day 18 Months
Rates From 0.65%
Max LTV 80.00%
Max GDV 55%
First Charge Yes
Second Charge Yes
Development FInance Yes
Regulated Loans Yes
Residential Yes
Commercial Yes
Unencumbered Property Yes
Auction Yes
Geography Nationwide