A bridging loan is taken out to ‘bridge’ the gap between the purchase of a new property and the sale of an existing one. Loans are generally short-term and secured on the existing property, but repaid as soon as this is sold.
Commercial Bridging Loans – how to raise funds fast
As a business owner, it’s great to take advantage of an opportunity that will drive your business forward.
You may be ready to expand your premises when the right piece of real estate comes up for sale at auction. The trouble is, approaching your bank for a loan will take too long, so you could lose out.
Alternatively a large amount of inventory stock is being sold off at a bargain price. You know you can sell it on and make a profit but you haven’t got the funds available to make the purchase.
Here’s how a Commercial Bridging Loan can step in and help you seal the deal.
What Is A Commercial Bridging Loan?
Commercial Bridging Loans are short-term business loans designed to fund property purchases or business ventures where cash is needed quickly.
Also known as Commercial or Business Bridge Loans, they can be arranged quickly, sometimes within hours. Terms can range between one day and 12 months and loan amounts can start from as little as £25,000 up to a £1 million.
Provided by specialist lenders, a property or other asset your business owns will be used as security against the loan. Lenders also prefer to deal directly with an independent financial adviser.
So if you need this type of funding, approach an adviser that has experience in arranging commercial bridging loans. You can always check their credentials on the financial services register using their registration number.
What can bridge financing be used for?
Bridge financing can have many different commercial uses. Here are some of them.
- Fund early stage planning permission, building regs to develop a piece of land or commercial property
- Pay for semi-commercial property, such as a restaurant with residential flats above
- Clinch a property sale or buy a job lot of stock at auction
- Help you continue business as usual if your business is seasonal
- Plug a financial hiatus while you’re waiting for a large invoice to be paid
A commercial bridge loan can be used to fund a number of real estate development projects with the property as security, such as:
- guest houses, HMOs and hotels
- pubs and restaurants
- care homes and places of worship
- semi-commercial buildings like shopping arcades with adjoining apartments
They can also include industrial properties, such as retail and business parks, warehouses, factories and offices.
Why choose bridging finance?
Bridging loans are designed to be fast and flexible, making it easy for you to raise funds quickly to finance something you need to support or develop your business.
Having a bridging loan waiting in the wings means you can act decisively and swiftly when the right business opportunity presents itself.
Repayment terms are short. So while interest charges may be higher, you can pay the loan off early when you receive longer-term finance, or sell a property on. Plus, you can repay the loan off early without penalty.
What you need to consider
A lender will expect you to have an exit strategy before applying for the loan. This will help you weigh up the advantages and disadvantages. A good adviser will help you nail down:
- how much you need to borrow and the amount of you’ll pay overall
- when can you repay the loan
- your method for repaying the loan – ie via the sale of a property, receipt of a large invoice payment, etc
- your contingency if a sale takes longer than expected, or a client delays payment
The strength of your exit plan will determine the amount of interest you’ll be charged and whether an >open< or >closed< bridging loan will work best for you and the lender.
Is it expensive?
Interest rates are now more competitive as commercial bridging loans have become a popular way to raise finance quickly.
Interest rates and other charges will vary from lender to lender and will also depend on what you’re planning to use the loan for and when you’ll repay it, etc. The good news is you can include the costs associated with the loan as a business expense.
What are the alternatives to Commercial Bridging Finance?
Commercial mortgages come with lower interest rates and longer repayment terms. They are also flexible and can be used for a range of commercial property types.
However they take longer to arrange. If you need to be quick off the mark, a bridging loan is the best option. A commercial mortgage could be part of your exit strategy.
How Can CS Mortgage Solutions help?
It’s important to use an experienced independent financial adviser that specialises in commercial loan transactions and business development finance.
We are authorised and regulated by the Financial Conduct Authority and our business is registered in England and Wales. This means we are qualified to discuss financial options with you that will help you develop your business.
Our experience in business finance means we can help you calculate the loan amount you need to borrow, how long you’ll need it for, and create your exit strategy for repaying the loan.
We will then submit your application to the bridging lenders we deal with who will be able to arrange short term finance for you at the most competitive interest rates.
Our aim is always to save you time, effort and money.
Remember your home may be repossessed if you are unable to repay your loan.