Bridging Loans

What is a bridging loan?

Bridging finance (otherwise known as a bridge loan) is a short-term borrowing solution for businesses or individuals who need a quick turnaround, and it is frequently used to ‘bridge’ the gap while waiting for future money. These types of loans explained simply, are primarily used on developments and property projects, but can also be used for any residential or business loan purpose, making it extremely versatile.

As traditional banks and building societies have become more cautious about lending, the market for bridging finance companies has grown.

The key considerations for lenders of this type of finance are the exit strategy and how you intend to repay the loan at the end of the facility. You will need to be a property owner as this is used as security in the loan agreement.

We can help assist businesses registered in England and Wales, Scotland and Northern Ireland. Facilitating a loan for first time buyers looking at property finance to renovate and then sell on a commercial property can be difficult as lenders do like to see some past history but that’s not to say it’s not achievable. There are many different types of property we can look to help funding for.

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What are the benefits of a bridging loan?

Bridging loans can be used for any reason, however they are most commonly used to purchase or renovate an asset or property. They are often employed by property developers for this reason since they provide quick access to funds while, for example, obtaining a mortgage.

The amount a lender will look to borrow you will depend on the loan to value (LTV) on your current home or business property. Whilst dealing with a bridging loans broker, such as Smart Funding Solutions, we can advise on which lender would be most beneficial to approach to reach your end goal.

It’s important to know all the options availabe to you, weighing up the pros and cons of bridge loans. Some broker fees may apply for the time spent finding the best solution for you as to compare bridging loans can take some time.

There are some alternatives to bridging loans, one being development finance or you could look at secured loans fixed against an asset you own. Bridge loan interest rates will vary from lender to lender, some will charge a valuation fee, an exit fee and some will only deal with unregulated bridging loans opposed to regulated bridging. The amount bridging loans cost and monthly interest rates will come down to several factors:

Commercial bridging loans are becoming a well known way of achieving business finance. High street banks have a past history of taking their time making a decision but with access to over 250 lenders, we’ll be sure to find the best possible solution in the shortest amount of time.

With the loan secured against an asset such as a property, it can take some time to complete which is why we do all the hard work for you. Comparing bridging loans rates and types of bridge loans can be time consuming as each lender is unique. We can facilitate options for the following on top of bridging loans:

Always use reputable mortgage brokers as they’re authorised and regulated by the financial conduct authority with access to helpful information such as mortgage guides, loans guides and liability insurance. The can also advise on a regulated bridging loan, stamp duty, income protection, business insurance, public liability insurance, different rate mortgages and often send over a link to a repayment calculator. A regulated bridging loan is usually when you plan to occupy the property yourself or an immediate family member.

What are the most common exit routes?

Bridging loans are classified into two types: closed bridging loans and open bridging loans. The main distinction between them is the presence of an exit strategy. The most significant factor in obtaining approval from a lender and what determines the rate is the security used, the usage of funds, and the exit plan.

This refers to outlining and demonstrating to your potential funder how you intend to repay the loan. As seen below, there are various common possibilities for repaying the short-term loan.

Smart Funding Solutions are authorised and regulated by the financial conduct authority, FRN: 972740.

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