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
Karl Hodson
Finance Expert
Karl is responsible for helping businesses across the UK raise funding for a variety of purposes such as working capital, expansion and capital equipment. He has specialist knowledge of raising finance through invoice and asset-based lending, crowdfunding, loan and equity funds and Government schemes.
Top Finance Tips
We work across a wide range of sectors throughout the UK, providing specialist advice to each sector.
Can I use property as security for a business loan?
Secured business loans require one or more assets to be put forward as collateral. This protects the lender from financial loss if a company cannot afford to keep up with the repayments at any stage.
Does my company have a credit score and how can I improve it?
Limited companies do have credit scores and they’re used for a similar purpose as individual credit ratings. Lenders use them as a guide to creditworthiness, but a business credit score is also useful for suppliers and investors to gain insight into your company’s financial situation.
What is bad debt and how can I protect my company?
Bad debt presents an insidious threat to the financial stability of your business. It places strain on your working capital and creates uncertainty in paying your bills, but this can be addressed successfully if you take proactive steps to protect your company.
What is the difference between open and closed bridging loans?
Bridging loans are short-term forms of secured finance that literally ‘bridge’ a gap between funds going out of a business and monies coming in.