Commercial Bridging Loans: Fast Finance for Business Property Needs

Commercial Bridging Loans: Fast Finance for Business Property Needs

When speed and flexibility are essential, commercial bridging loans provide businesses with a reliable short-term finance solution. These loans are designed to help clients secure, refinance, or release equity from commercial properties without the lengthy delays often associated with traditional lending. Here’s how bridging loans work: after a straightforward application, the property is valued, and if approved, funds can be disbursed quickly, often within days.

Whether buying property, including business premises, for expansion, auction purchases, renovating existing buildings, or managing cash flow during critical transitions, commercial bridging loans offer a tailored approach to business finance.

For urgent funding needs, a same day decision is often possible, ensuring rapid access to capital when it matters most.

What Are Commercial Bridging Loans?

A commercial bridging loan is a short-term facility secured against non-residential or mixed-use property. Eligibility and loan size are influenced by the property value, property type, and the results of a property valuation. Unlike conventional finance, these loans are designed to bridge the gap between an immediate funding need and a longer-term solution, such as refinancing or a property sale.

Lenders offer bridging loans for a short period, typically with a loan term tailored to the borrower's exit strategy. The maximum LTV is determined by the property type and value. These loans can be used by business owners, investors, or developers to act quickly on time-sensitive transactions or unlock capital tied up in commercial real estate.

A longer term loan or long term finance is often used as an exit strategy after the bridging loan.

Types of Bridging Loans

Commercial bridging loans come in several forms, each designed to meet different business and property needs. Open bridge loans offer flexibility, as they do not have a fixed repayment date, making them suitable for situations where the exact timing of funds is uncertain. In contrast, closed bridge loans have a set repayment date, often used when the borrower has a clear exit plan, such as a scheduled property sale or completion of a commercial mortgage.

For property investors and businesses with existing finance on their commercial properties, a second charge bridging loan can be an option. This type of bridging loan is secured against a property that already has a mortgage or another loan in place, allowing borrowers to access additional funds without refinancing their primary loan.

There are also bridging loans specifically tailored for semi commercial properties, those with both commercial and residential elements, such as a shop with flats above. These semi commercial bridging loans are ideal for investors looking to purchase, refurbish, or refinance mixed-use properties.

Understanding the different types of bridging loans available helps property investors and business owners select the most appropriate solution for their unique circumstances, whether dealing with commercial properties, semi commercial properties, or more complex property types.

Common Uses for Commercial Bridging Loans

Commercial bridging loans are versatile and can support a wide range of business goals. Common uses include:

• Acquisition of Commercial Property: Purchasing offices, warehouses, industrial units, semi commercial property, or retail units. Suitable for limited companies, sole traders, partnerships, and LLPs.
• Commercial-to-Residential Conversion Projects: Bridging finance during planning or development stages, or as an alternative to development finance for short-term funding needs.
• Unlocking Capital for Business Growth: Using existing property equity to invest in expansion, equipment, working capital, or stock.
• Auction Purchases and Quick Access to Financing: Providing quick access to funds to finance auction purchases, urgent business needs, or to fund time-sensitive property transactions.
• Refinancing Existing Debt: Replacing maturing loans, refinancing, or restructuring finance ahead of longer-term financing or alternative funding arrangements.
• Bridging Delays in Sale or Remortgage: Providing liquidity while waiting for proceeds from a sale or refinance to complete.

Example Terms Offered

A client recently approached Global Bridging Finance with an opportunity to purchase a commercial premises valued at circa £3.5 million. The property's value was established through a property valuation, which determined the maximum LTV and the eligible loan amount. Due to tight timeframes and the need for swift completion, we arranged a bridge loan of approximately £2.4 million (circa 70% LTV) for buying property. This allowed the client to complete the purchase and secure the property while planning to transition to a commercial mortgage or long term finance as an exit strategy.

Why Use Commercial Bridging Loans?

The benefits of using commercial bridging finance include:

• Speed: Quick application and approval processes mean funds can be available within days.
• Flexibility: Loans are tailored to suit the project timeline, exit strategy, and the borrower's repayment plan. Lenders often take a common sense approach to structuring loan terms and repayment plans, making it easier for borrowers to secure funding that matches their needs.
• Access to Capital: Enables businesses to unlock value from commercial assets, including the security property, without waiting for conventional finance.
• Support for Complex Transactions: Suitable for non-standard property types or unique business structures. Selecting an appropriate loan term and having a clear repayment plan are especially important when the security property is involved, as this ensures the property can be sold or refinanced within the required timeframe.

Who Can Benefit?

Commercial bridging loans are suitable for a wide range of clients, including limited companies, sole traders, and other business structures such as partnerships and LLPs:

• Property Investors: Purchasing or refinancing commercial premises or portfolios.
• Business Owners: Acquiring or refinancing business premises and providing working capital to manage operations, growth, or restructuring.
• Developers: Funding planning, development, or conversion projects.
• Overseas Buyers: Acquiring UK-based commercial property without relying on delayed international funding.

Key Considerations

While bridging loans offer fast access to capital, they must be supported by a clear exit strategy, such as a scheduled property sale, refinancing agreement, or confirmed income source. Lenders typically require a security property and a clear repayment plan to approve the loan, ensuring that the borrower can repay within the agreed loan term. Selecting the right loan term is crucial, as it should be long enough to accommodate potential delays in selling or refinancing the security property, and repaying the loan early may incur additional charges or affect the interest charged. When evaluating the total cost of the loan, it is important to consider the interest charged alongside other fees. Lenders may also require a minimum deposit, but there is often no specified upper limit for loan amounts, especially for commercial bridging loans.

Valuation, legal, and structuring considerations may differ for commercial assets compared to residential ones, making expert guidance essential.

Application Process

Applying for a commercial bridging loan is designed to be straightforward and efficient, allowing businesses to access funds quickly when needed. The process typically begins with submitting an application to a bridging loan lender, detailing the property involved, the desired loan amount, and the intended use of the funds.

The lender will then review the application, focusing on key factors such as the property’s value, the borrower’s credit history, and, most importantly, the proposed exit strategy. This assessment helps the lender determine the risk and structure suitable loan terms, including interest rates and repayment terms.

Once the application is approved, the lender issues a formal offer outlining all the details of the bridging loan, such as the interest rate, fees, and repayment schedule. After the borrower accepts the offer, the funds are released, often within days, enabling the borrower to act quickly on their commercial property opportunity.

Working with an experienced lender or broker can help streamline the application process, ensuring all requirements are met and the bridging loan is arranged efficiently.

Credit Requirements

Credit requirements for a commercial bridging loan can vary significantly between lenders and loan products. While some bridging loan lenders prefer applicants with a strong credit history, others are willing to consider borrowers with bad credit, provided there is a viable exit strategy and sufficient security in the property.

Borrowers with less-than-perfect credit may still be eligible for bridging loans, but they should expect higher interest rates or more restrictive loan terms to offset the increased risk to the lender. In some cases, lenders may also request additional security, such as a personal guarantee, especially if the applicant’s credit history is weak.

It’s important for businesses and property investors to review the specific credit requirements of each lender before applying for a commercial bridging loan. Being prepared with documentation and a clear exit plan can improve the chances of approval, even for those with challenging credit backgrounds.

Fees Associated with Commercial Bridging Loans

When considering a commercial bridging loan, it’s essential to account for all associated fees to understand the true cost of borrowing. The most common fees include:

• Arrangement Fee: Typically a percentage of the loan amount, this fee is paid to the lender for setting up the bridging loan.
• Valuation Fees: Paid to a professional valuer to assess the property’s market value, which helps determine the maximum loan amount.
• Interest Charges: Interest is charged on the amount borrowed, often calculated monthly and can be either fixed or variable.
• Exit Fees: Some lenders charge an exit fee when the loan is repaid, especially if the loan is settled before the end of the agreed term.
• Broker Fees: If a broker is used to arrange the loan, a broker fee may apply for their services.

Other potential costs include legal fees, early repayment charges, and any additional fees specified in the loan agreement. Understanding all these costs upfront helps borrowers make informed decisions and avoid unexpected expenses during the life of the commercial bridging loan.

Exit Strategy

A well-defined exit strategy is a cornerstone of any successful commercial bridging loan application. The exit strategy outlines how the borrower intends to repay the bridging loan at the end of the term. Common exit strategies include refinancing with a longer-term commercial mortgage, selling the property, or using proceeds from a business or investment.

Lenders place significant emphasis on the exit strategy, as it directly impacts the risk of the loan. A clear, realistic, and achievable exit plan reassures lenders and increases the likelihood of approval for the commercial bridging loan. It also helps borrowers avoid early repayment charges and ensures a smooth transition to longer-term finance or completion of the property transaction.

Whether the plan involves securing a commercial mortgage, completing a property sale, or another method, having a robust exit strategy is essential for both lenders and borrowers to ensure the bridging loan is repaid on time and in full.

Why Work With Global Bridging Finance?

At Global Bridging Finance, we understand the unique challenges of commercial bridging. We offer:

• Deep Market Knowledge: Insight into commercial property values, tenancy structures, and funding strategies.
• Access to Specialist Lenders: We work with lenders comfortable with complex, high-value commercial transactions and who can offer bridging loans for a wide range of property types, including semi commercial property, retail units, and mixed use property.
• Flexible Loan-to-Value Options: We provide flexibility in maximum LTV, and for properties in high-demand areas or with strong characteristics, we can secure a higher LTV, allowing you to access more funding against your property’s value.
• Funding Without Planning Permission: We can fund properties even if they do not have planning permission, giving you more options for your property transactions.
• Tailored Structuring: Custom loan solutions aligned with your business needs and exit plan.
• Efficient Delivery: We act quickly and communicate clearly to ensure your funding arrives without delay.

Final Thoughts

Commercial bridging loans offer a powerful solution for businesses needing fast, short-term capital. They provide quick access to capital for urgent business or property needs, ensuring rapid availability of funds when timing is critical. Whether securing a new site, expanding operations, or releasing equity, these loans provide speed, control, and strategic financial flexibility.

Get in Touch

If you need to act quickly on a commercial property deal or require short-term finance to support your business, contact Global Bridging Finance today. Our expert team is ready to help you secure the right commercial bridging loan for your specific needs.