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Bridging loans

Short-term finance secured on property, designed to bridge a gap until a sale, refinance or other money comes in.

  • Free to use, no obligation
  • £5,000 to £2m+ for UK limited companies and LLPs
  • Matched to a broker who arranges bridging loans
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What bridging loans are

A bridging loan is short-term finance secured on property, typically arranged for anything from a few weeks up to around 12 to 24 months. It is designed to cover a gap, for example buying a property before another sale completes, or securing a purchase quickly before longer-term finance is in place. Interest is often rolled up or retained rather than paid monthly, with the loan repaid in full at the end of the term.

Bridging often suits companies that need to move quickly, such as buying at auction, where completion is usually required within a set number of days, or taking up a time-sensitive property opportunity. It is also used to buy property that is not yet mortgageable, such as premises needing refurbishment. The key to any bridging loan is a clear exit plan: how the loan will be repaid when the term ends.

What businesses use it for

Auction purchases

Complete on a property bought at auction within the deadline, which is often too short for a standard commercial mortgage to be arranged.

Chain breaks

Buy new premises before your current property has sold, so the business can move without waiting for a sale to complete.

Refurbishment

Buy a property that needs work before a mainstream lender will accept it, then refinance onto a longer-term mortgage once the improvements are complete.

Short-term opportunities

Act quickly on a time-sensitive purchase or business need while longer-term finance, a sale or other money is being arranged.

How it works

1The property and exit are reviewed
The lender looks at the property offered as security, its value and how the loan will be repaid at the end, usually through a sale or refinancing. A clear, realistic exit plan is central.
2Valuation and legal work
A valuation is carried out and solicitors handle the legal work. Bridging lenders can often move faster than mainstream lenders, especially when documents are ready and the case is straightforward.
3Repay at the end of the term
Interest is often rolled up or deducted at the start. At the end of the term, the loan and interest are repaid in full, usually from the sale of a property or a new longer-term loan.

What lenders look at

Every lender has its own criteria, but these are the things they usually check.
Value and type of the property offered as security
A clear, realistic exit plan
Loan size compared with the property’s value
Experience with similar projects, for refurbishments
Credit history of the business and its directors

To use Loanleaf

  • UK limited company or LLP
  • Trading for 6 months or more
  • Annual revenue of £50,000+
  • Borrowing £5,000 or more
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Things to consider

Higher cost

Bridging is designed for short periods and usually costs more than longer-term borrowing. Interest is often charged monthly, and there may be arrangement, valuation, legal and exit fees. It is rarely suitable for long-term needs.

Exit risk

If the sale or refinance you are relying on is delayed or falls through, you may need to extend the loan, which adds cost, or the lender may take action against the property. Build in time and a backup plan where you can.

Security and guarantees

Bridging loans are secured on property, which is at risk if the loan is not repaid. Lenders often ask for personal guarantees from directors as well. Make sure you understand what happens if the loan runs past its end date.

Bridging loans: questions and answers

How long does a bridging loan last?
Bridging loans are short-term, usually running from a few weeks up to around 12 to 24 months. The term is set around your exit plan, such as the expected date of a sale or a refinance onto longer-term finance.
What is an exit strategy?
It is how you will repay the loan at the end of the term. Common exits are selling a property or refinancing onto a commercial mortgage. Lenders want to see that the exit is realistic before they lend.
How quickly can a bridging loan be arranged?
Bridging lenders can often move faster than mainstream lenders, but timescales depend on the valuation, the legal work and how quickly documents are provided. Telling the broker about any deadline, such as an auction completion date, helps.
How is interest paid?
Interest is usually calculated monthly. It may be paid each month, added to the loan and repaid at the end, or deducted from the loan at the start. Each approach affects how much you receive and how much you repay.
What is the difference between open and closed bridging?
A closed bridging loan has a fixed repayment date, usually because the exit, such as a sale, is already agreed. An open bridging loan has no fixed date, but must still be repaid within a maximum term.
How can Loanleaf help?
Loanleaf is an introduction service, not a lender or broker, and we don’t give advice. You answer one short form about your company and what you need, and we match you with a specialist finance broker who works with bridging loans. It’s free to use and there’s no obligation to go ahead. The broker will explain any fees of their own.
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