5 Star Rated Service
Supported 1,000+ Directors
Equity Release vs Bridging Loan
What are the differences between equity release and a bridging loan?
Equity release and bridging loans are both forms of commercial finance that can support growth plans and help you develop your business. Equity release is a longer-term financing option when compared with bridging loans, and is based on the increase in value of your commercial property.
In comparison, a bridging loan is taken out on a short-term basis – generally up to 12-months. If you’ve found a new commercial property that you want to purchase but your sale hasn’t yet been completed, for example, this type of finance can ‘bridge the gap’ between transactions.
What is equity release for businesses?
Equity is the difference between the amount outstanding on your commercial mortgage and the current value of the property. If your commercial property has increased in value since you took out your mortgage, you may be able to release some of that equity.
Remortgaging your commercial premises can fund various initiatives – you might want to purchase another property, for instance, pay off business debts, or otherwise invest in business growth.
Advantages of equity release
- Freedom to use the money for business purposes as you wish
- You can take advantage of rises in the commercial property market
- Up to 75% loan-to-value (LTV) may be available
How do bridging loans work?
A commercial bridging loan can be a useful short-term financing option if you need quick access to cash, but this type of borrowing must be for a specific purpose. It’s commonly used when a sale transaction hasn’t quite completed, but a business owner wants to go ahead with the purchase of a new property.
Bridging loans are particularly suitable for commercial landlords, or those that want to expand a property portfolio. You’ll need to provide security for a bridging loan, and evidence to the lender that you can repay – using the funds from the sale of another property, for instance.
Advantages of bridging loans
- Typically quick to access
- The interest can be incorporated into the total cost so no monthly repayments need to be made
- Open bridging loans mean you can pay off the loan whenever you choose within 12 months
Is equity release or a bridging loan better for you?
Whether an equity release or a bridging loan is more suitable for you depends on your situation and your reasons for borrowing. Equity release offers more freedom in terms of how you use the funds, whereas a bridging loan offers access to funds quickly.
UK Business Finance are commercial finance brokers and can provide the independent, reliable guidance you need if you’re considering commercial equity release or bridging finance. Please get in touch to find out more – our services are free and no obligation.
Contact us for more information
- Fully Independent
- Whole Market Access
- Matchmaking Process
Matt Cluer
Finance Expert
Matthew has over 15 years’ experience of working alongside businesses across the UK supporting directors, shareholders, and key stakeholders. At UKBF Matthew works tirelessly to secure the funding companies need when they need it. Adept at raising finance through invoice and asset-based lending, crowdfunding, loan and equity funds as well as Government schemes, Matthew is perfectly placed to help your business access the funding required whether for general working capital, or to embark upon an ambitious growth and expansion project.
Top Finance Tips
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
Why use a commercial finance broker?
A commercial finance broker plays an important role for businesses looking for funding. They can source the most suitable types of finance using a whole-of-market search strategy whilst also accessing the best deals and lenders.
What are cash flow forecasts and why are these important when obtaining business funding?
Operating with positive cash flow helps your business to pay its bills, conduct day-to-day trade with minimal issues, and plan confidently for the months and years ahead. But how do you know that there will be sufficient cash available when it’s needed?
Good debt vs Bad debt
Managed well, debt can improve your credit rating, enable expansion, and stabilise cash flow. It’s the backbone of growth but with so many different types of borrowing now available, it’s important for your business to carry ‘good debt’ rather than ‘bad debt.’
How to best prepare my company for a finance application
When preparing your company for a finance application, it’s key to present the business in its best light whilst also providing realistic projections, your plans for the funding, and how it will help the business grow.