Can’t pay company bridging loan – what are my options?

Understanding bridging loan defaults

A bridging loan is a form of short-term finance that lasts for up to 12 months. It provides vital funding between transactions when a company purchases one property before the sale of another has been completed.

Bridging loans can be taken out on a monthly repayment basis, or the interest rolled up and the loan repaid in full at the end of the term. Either way, lenders need to see a robust exit plan from the borrower before sanctioning a bridging loan, as this manages their risk.

So what happens if your company can’t repay a bridging loan?

What happens if you can’t pay your company’s bridging loan?

The actions a lender takes and their speed of action can vary depending on whether they’re regulated or unregulated. Unregulated lenders tend to act faster but these are the typical responses to a bridging loan default:

• Apply a higher interest rate, which will considerably increase the overall cost of the loan
• Charge late payment fees and other financial penalties, which may be on a daily or monthly basis depending on the loan agreement
• Issue a formal notice of default informing you of their intention to take legal action
• Repossess the asset, although this is generally a last recourse

Obtaining professional assistance as soon as possible is important, therefore, and ensures you take the right action in this situation. Making prompt contact with the lender is also crucial, so what might be your options if you can’t pay your business bridging loan?

What are my options if I cannot afford the bridging loan repayments?

Depending on your company’s circumstances, you may be able to explore one or some of the following options if you are struggling to repay your bridging loan:

• Sell your property early

If your exit strategy is based on selling your property you could reduce the price to generate a faster sale and repay your bridging loan. Selling at auction can be a good way to achieve this and ultimately help you avoid onerous fees, interest, and ultimately, legal action by the lender.

• Consider refinancing your bridging loan

Your existing lender, or a new one, might consider re-financing the loan depending on the strength and reliability of your exit plan, potentially rolling up the interest until the end of the loan term rather than making monthly payments.

• Seek alternative financing

If you own other high-value assets, such as plant or machinery, you may be able to leverage their value using asset-based lending. A sale and leaseback arrangement, for example, provides a lump sum of capital that could be used to meet monthly repayments and interest on your bridging loan.

Reliable support when you can’t pay your company bridging loan

UK Business Finance are highly experienced commercial finance brokers and can help you find the right type of regulated bridging or alternative finance. We offer a no-obligation service that’s free of charge and take a whole-of-market approach to develop a shortlist of suitable lenders.

Please get in touch with the UK Business Finance team for expert assistance if you can’t pay your company bridging loan. We can work alongside you to help you explore your options and secure the right funding for your situation.