Bridging Loans
What is a Bridging Loan?
A bridging loan is a short-term funding option used to ‘bridge’ a gap between a debt becoming due for payment and a line of credit becoming available. In pressing circumstances, a bridging loan can be used as a short-term loan.
What are they used for?
They are used to fund people or businesses allowing time to refinance to longer term debt.
They can also be used to assist in the purchase or sale of a property. Bridging loans can be used to:
- Purchase a property quickly – such as auction purchases
- Fund property restoration or conversion work
- Repossession prevention
When could a Bridging Loan be useful for my business?
1. Property Developers & Investors
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- Development finance or refurbishment loans for renovation and resale
- Auction finance for quick purchases
2. Businesses in Transition
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- Companies waiting for long-term financing but need cash flow now
- e.g., a manufacturer bridging until bank loan approval
3. Commercial Buyers
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- Firms acquiring offices, warehouses, or retail units who need fast funding
How long can I borrow the money for?
Bridging loans are usually offered for between 1-18 months, with the loan repayable in full at the end of the term. Unlike other forms of borrowing the monthly interest is often rolled into the loan, meaning there are no repayments to make during the term of the loan.
How much can I borrow?
Lenders typically lend between £50,000 and £2.5 million. Due to the reluctance of lending by banks, bridging loans have become very popular resulting in a competitive market. Rates start from 0.45% per month depending on circumstances. There may also be administration fees and early repayment fees, these will be detailed by the lender.
Find what you need
Businesses or individuals who need short-term funding quickly to aid a purchase and have a clear exit strategy.
Businesses or individuals who need to keep existing lender but require extra capital short term.
Businesses needing quick, short-term property or land-secured funding to purchase commercial premises before a long-term solution.
Individual property developers, investors and businesses looking to purchase at auction.
How long does it take to arrange a Bridging Loan?
The application process is usually far simpler than for other types of borrowing and applications can complete very quickly, usually in 5-14 days.
Types of Bridging Loans
First Charge
Bridging Loan
- Key Features:
- Loan secured against a property as the primary (first charge) debt
- Lender has first claim if the property is sold or repossessed.
- Depend on whether the asset is already mortgaged.
- Best for businesses who need short-term funding quickly – usually between 3–18 months and have a clear exit strategy (eg selling the property, refinancing, or long-term financing arranged).
Second Charge
Bridging Loan
- Key Features:
- Secured against a property that already has a mortgage.
- Riskier for lenders, usually higher interest rates.
- Depend on whether the asset is already mortgaged.
- Best for businesses who don’t want to refinance or replace their existing loan (maybe because it’s on a good rate or has early repayment penalties) or still need to unlock equity in the property for short-term cash flow.
Commercial Bridging Loan
- Key Features:
- Best for businesses who don’t want to refinance or replace their existing loan (maybe because it’s on a good rate or has early repayment penalties) or still need to unlock equity in the property for short-term cash flow.
- Best for businesses that need fast, short-term finance secured against commercial property or land. These loans are typically used as a temporary funding solution until a longer-term strategy (like refinancing or sale) is in place.
Development / Refurbishment
Bridging Loan
- Key Features:
- For property developers or businesses needing funds to refurbish, real estate.
- May be staged (drawdowns released as project milestones are reached).
- Best for property developers, investors & landlords, construction & building companies, businesses buying undervalued or distressed properties, SMEs in property trading or commercial property owners.
Auction Finance
- Key Features:
- Fast bridging loan tailored for buying properties at auction.
- Quick approval and drawdown to meet auction timelines (typically 28 days).
- Best for property developers, investors and businesses looking to expand into new retail, industrial, or leisure spaces.
5 Steps for Bridging Loans
1
Get in touch
2
Meeting to assess your needs
3
Meet lender
4
In principal offer from lender
5
Accept offer, move to valuation and legals with solicitor to complete
Speak to us about your requirements
Bridging Loan arranged to help fund property renovation for a waiting tenant
- West Yorkshire based property developer, who has a portfolio of 10 properties.
- Looking to purchase a property out of probate.
- Knew the area well and already had a tenant lined up once purchase went through.
- The property only required a cosmetic makeover, which the Director could do through his other businesses, which was building and renovations.
- We were able to source a 12-month bridging loan for £75k, on a rolled-up basis allowing the Director time to complete the work required and the tenant to move in.
- We are now in the process of sourcing a longer-term funder for the property, which has increased in value allowing the Developer to refinance the Briding loan and invest in further property.