Commercial bridging loans are, as their name suggests, bridging loans which are secured against commercial property. They are used to secure funds quickly to fund commercial property purchases or release funds from a commercial property.
They are short-term, interest only loans which are usually arranged for up to 18 months (although some lenders offer longer terms).
During the term of the loan, interest is usually rolled into the loan and repaid at the end of term, or sooner if the loan is repaid early. As such, there are usually no monthly payments to make. This is similar to the way interest is handled using a residential bridging loan or development finance.
hey are used when funding is needed to secure a commercial property, often in situations where a commercial mortgage wouldn’t be appropriate. This is usually either related to how quickly the funds are needed, or because a commercial mortgage wouldn’t be available in current circumstances.
The main reasons for taking commercial bridging loans are buying at auction, in other conditions where completion must take place quickly, or where refurbishment works will be undertaken on the property. Other reasons include funding a property while it is sold, funding for new businesses and using a bridging loan to repay adverse credit prior to a term loan being taken.
They are often used as bridging loans for small businesses to purchase or release equity from their business premises.
Our commercial bridging loan products are often used to fund:
Offices, professional practices
Pubs, bars, and restaurants
Hotels, guest houses and B&Bs
Retail units and business parks
Warehouses, factories and industrial units
Large HMOs/unusual residential investments
Mixed use property
Care homes
Places of worship
Commercial premises
We can look at properties that are ready to occupy, those in need of refurbishment and even property that will be converted or developed.
We’re able to offer loans to those looking to borrow in their personal name, through a partnership, Limited company, offshore limited companies, trusts and pension funds. Lending can be to UK residents, expats and foreign nationals. In addition, adverse credit is not usually an issue.
Our minimum loan is only £25,000 and we don’t have a strict maximum, meaning we can fund practically any loan.
Commercial bridging loans are usually available up to a maximum of 75% of the property’s value. The maximum loan available to a borrower depends on the type of property, its location, the market for such properties and your chosen exit strategy. Lenders ultimately want to reduce their own risk, and as such will only offer the highest LTVs where safe to do so.
If your exit strategy is the sale of your property, then the lender will want to understand the demand for such properties and how quickly it is likely to sell. Where there is a risk that a buyer may not be found during the term of the loan, you are likely to be offered a lower LTV.
Where the exit is a refinance to a commercial mortgage, the lender will want to ensure that your new mortgage will be achievable. They will check the likely maximum loan on a commercial mortgage and won’t want to lend more than that, unless you have a way of covering the difference.
Commercial bridging lenders tend to price each loan on risk. The best rates usually start at around 0.65% per month. As a guide, an interest rate of 0.75% per month is a good benchmark. For a riskier application, such as an unusual property or a client with heavy adverse credit, rates will be around 0.95% – 1.5% per month. The lowest rates tend to be offered on applications at lower loan to values. Lenders take a tiered approach to pricing their loans, with the lowest rates being offered at 50% LTV and below.
On top of the interest charges, when taking out commercial bridging loans, a number of fees must be paid. They are:
There are a few tips to secure a better deal on commercial bridging loans. They are:
Taking out bridging finance is a big decision and it needs to be handled correctly. As such, you should never rush when making your decision, even if you need to complete quickly.
There are some key considerations, which if made upfront, can save a lot of problems further down the line. They are:
In addition, you should consider the following about any product that you’re looking to take:
When using a broker, they should be able to tell you the answers to these questions for any option presented.
When looking to apply, you will usually be asked for the following information:
The commercial bridging loan application process usually takes 10-14 days to complete and for you to receive your loan. We can complete loans for commercial properties the same day, if all information, including the valuation and legal pack is completed and satisfactory.
They are usually offered by specialist lenders, as this is a fairly niche area of the bridging market that not all lenders choose to take part in. Finding a good lender can be tricky, as even those lenders who do offer finance against commercial properties have greatly differing lending appetites. Bridging Ventures Group underwrite our loans, giving us a advantage in this field to give you a fast response.
The decision must be made whether to work with a broker, and if so, which one. Some brokers charge large fees for their service, which add to your costs – whereas we don’t charge a fee. One of our experienced agents will be able to speed up the process and offer you the best terms.
For commercial property, every loan is non-regulated. For semi-commercial property, your loan may be regulated if you live in the property and are borrowing in your personal name. This depends on how much of the property you occupy as a main residence.
Yes, where affordable, it’s fine to pay the interest monthly rather than adding it to the loan.
Where this is to be done, proof of income will be required to prove affordability.
Commercial mortgages are a lower cost alternative to bridging loans for longer term borrowing.
Although this is the case, taking out a commercial mortgage instead of bridging finance isn’t always possible – either because of time constraints or lender criteria.
Lenders price applications based on the perceived risk presented to them. As commercial property tends to be less liquid than residential, the rates charged are higher on commercial bridging finance.
For higher quality, in demand properties, you’re likely to secure the best interest rates.
Yes, a business can get a bridging loan. They can take them to finance a property that they will occupy as their trading premises, or as an investment property. Both trading businesses and SPVs can borrow using this type of finance.
