Bridging Loans

Bridging loans have become a key financial tool for individuals and businesses who are in need of swift access to cash to bridge the gap.  

These short-term loans can help you mitigate the shortfall in funds you may experience between buying a new property or asset and selling one you already own. 

Bridging loans can enable borrowers to seize time-sensitive opportunities. 

In this article, we’ll walk you through the application process, the potential benefits this product can bring, and the considerations to reflect on before applying for a bridging loan.  

Their flexibility and speedy approval process make them attractive for those who can't afford to wait for a more complex loan application process.  

What’s more, bridging loans are not just limited to property transactions. They can also support business operations too and provide temporary financial solutions which can save you time, stress, and potentially interest payments.  

However, before taking the plunge, it's crucial to understand the associated costs, repayment terms, and risks involved in this type of loan.  

By shedding light on the intricacies of bridging loans, we aim to empower you with the knowledge to leverage them effectively and seize financial opportunities with newfound confidence. 

What is a bridging loan? 

A bridging loan, sometimes known as ‘bridge financing’, is a short-term loan typically offered by private lenders. 

They serve as a temporary financial solution to ‘bridge’ the common gap which appears in your bank account between the purchase of a new property or asset and the sale of an existing one.  

It’s designed to facilitate immediate access to the funds you need to resolve a transaction, enabling you to take advantage of any time-sensitive opportunities which come across your door. 

A positive many customers find is the fact that you’re less likely to be hindered by the lengthy approval process associated with other types of loan. Sometimes, we just don’t have the time to wait! 

Bridging loans are usually used in property transactions, where individuals need to secure a new property before selling the one they currently own. 

These loans can help front the purchase price of the new property at hand until the sale of the existing property is finalised on all sides.  

This ultimately allows you to swerve the prospect of missing out on favourable opportunities or facing unwanted delays in property transactions. This can be great for those in this position as, let’s face it, nobody feels good about missing out on the best outcome due to a lack of liquid cash being available.  

Bridging loans are known for their short-term nature. Loan terms will usually range from 12 – 24 months, but in some commercial cases, they can be as long as three years.  

Bridging loans offer a quick turnaround and minimal documentation requirements. 

This makes them an attractive option for those who are keen to get access to funds relatively quickly.  

However, it's important to note that bridging loans often come with higher interest rates and fees compared to long-term loans like mortgages, given their expedited nature and high degree of flexibility. 

With that being said, the speed at which they’re paid back can sometimes reduce the interest payable in comparison to a long-term loan which is paid back over a period of several years. 

Like mortgages, they are usually secured against an asset, which helps offset any risks on the lender’s side. This means that you use an asset you own as collateral, which will be at risk of seizure if you fail to repay your loan.  

However, the main crux of bridging loan eligibility is the viability of your repayment strategy, as the loan is typically repaid in bulk at the end of the term. 

Overcoming time-based challenges can be made possible by this loan product, allowing borrowers to capitalise on opportunities which may not have been possible otherwise. 

Is property the only reason you'd get a bridging loan? 

Whilst property is probably the most common reason people take out a bridging loan, it’s not the only one.  

Business purposes 

Bridging loans can be a means to support business operations. 

Things like covering short-term cash flow gaps, making inventory purchases, or financing expansion plans can be realised through accessing this type of financing.  

They provide rapid access to capital, allowing your company to seize growth opportunities with two hands or navigate temporary financial challenges. 

Auction purchases 

Some of the best property gems can be snapped up under the gavel, as you’ll know if you’ve ever watched 'Homes Under the Hammer'.  

However, buying property through auction typically requires you to pay the sum of cash you bid within a month of putting down your deposit.  

When participating in auctions, you’ll therefore need access to funding promptly.  

Bridging loans can be a way to get the necessary financing in order until permanent funding, such as a mortgage, is arranged later on. 

Property renovation 

If you’re dreaming of renovating a house to suit your taste better, or making a property fit for a sale, a bridging loan may be able to help cover the costs of this endeavour.  

Once the property is renovated and sold, or you’ve refinanced onto another long-term finance product, the bridging loan can be repaid in full. 

Property development 

Developers sometimes use bridging loans to finance construction or development projects they’re looking to undertake.  

These loans can cover all the expenses which crop up until the project is completed and is sold or refinanced. 

Divorce or inheritance settlements 

Bridging loans can be used to facilitate property settlements during instances of divorce or inheritance.  

They can be used to offer immediate funds to buy out one party's interest in a property while awaiting the finalisation of any related legal proceedings. 

It's very important to note that the terms and eligibility criteria for bridging loans often vary depending on the lender you choose and the specific purpose of the loan.  

Before you sign up, it can be beneficial to consult with a financial advisor or lenders to determine if a bridging loan is suitable for your needs and circumstances.

Can I get a bridging loan with bad credit? 

Obtaining a bridging loan with bad credit can present a set of unique challenges. 

However, doing so is not entirely impossible.  

While a good credit history is generally preferred by lenders on the market, there can be options available for you if you have poor credit. 

One option can to approach specialised lenders who focus on providing loans to people with bad credit holding them back.  

These lenders have a wealth of experience in working with borrowers in similar situations and may offer their customers the benefit of more flexible eligibility criteria.  

They can take into account factors which stretch beyond credit history, such as your salary.  

It's also important to brace yourself for the possibility of higher interest rates when applying for a bridging loan with bad credit.  

Lenders are likely to perceive bad credit as an increased risk factor, and to mitigate that risk they’re taking, they may tack on higher interest rates to your loan repayments.  

It's therefore important to carefully assess the terms and conditions of the loan and evaluate the overall cost before proceeding with the arrangement.   

Additionally, taking steps to improve your creditworthiness over time can increase your chances of obtaining more favourable loan terms in the future, should you need them. 

Let us help you find the best deal on bridging loans

If you need to secure short term finance to buy property, invest into a business, carry out property improvements, or for any other purposes, we can help you find the best deals available.

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We work with a number of highly experienced bridging loan brokers who can help you find the very best rates available on short term finance.

• We consider applications from customers with adverse credit and CCJs

• Our brokers compare bridging finance deals from all the leading UK lenders

• We work with the majority of UK bridging finance providers

• Our team provide access to leading rates on bridging loans

For all the latest deals on bridging loans, try our free bridging loan calculator or call us on 0117 313 8872.

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Benefits of bridging loans

Taking out a bridging loan can offer the following advantages to borrowers:

• Loans from £50,000-£15million

• Borrow up to 70-75% of a property’s market value

• Available on both residential and commercial properties

• Borrow as an individual, limited company, sole trader or partnership

• May be available as a 2nd, 3rd or even 4th charge loan on properties already subject to secured loans

Get the best rates on bridging loans

Our specialist team of bridging finance advisors can help you find the best deals on bridging loans from across the market and work out which are the best matches for your needs and finances. That way you can get the money you need, when you need it, at a cost you can afford. Have a questions about accessing a bridging loan or other form of secured borrowing? Call us today on 0117 313 8872 for a free initial consultation or use the contact form at the top of the page for a quick response.

FAQs 

What is a bridging loan?  

A bridging loan is a very common short-term financing option. 

It helps bridge the financial gap between the purchase of a new property or asset and the eventual sale of an existing one you already own.  

If you successfully apply, a bridging loan can provide you immediate access to funds, enabling you to seize time-sensitive opportunities while awaiting the completion of ongoing transactions. 

Are bridging loans just for businesses? 

No, bridging loans are not just for businesses, despite what you might’ve heard! 

While businesses often reap the benefits of bridging loans for various purposes such as funding ongoing operations or facilitating expansion, bridging loans are quite flexible.  

You can use bridging loans for several personal purposes such as buying a new house before selling your current one, funding property renovations you’ve been planning, or buying a property at auction.  

Bridging loans can offer businesses and individuals financial flexibility in equal measure. 

Are bridging loans expensive to borrow? 

Bridging loans typically come with high interest rates and fees to boot, at least when compared to traditional long-term loans.  

This is because bridging loans are short-term and involve a higher level of risk for lenders on the market.  

However, in some cases, a bridging loan can save you money in comparison to a person loan of the same amount as you’ll be required to pay it off much faster.