Bridging Loans

Bridging loans for UK businesses

If you need a short-term source of finance to ‘bridge the gap’ between money going out of your business and a payment coming in, a bridging loan could be the answer. Available over a typical maximum period of 12 months, a bridging loan can provide a quick injection of cash for a specific purpose.

At UK Business Finance, we can help you secure a bridging loan at the best rates. Just tell us how much you need to borrow and what the loan is for. We’ll then scour the whole market to find bridging loans that match your business’s specific requirements. There are no fees to pay for our service and we even write the loan applications on your behalf.

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What is a bridging loan?

A bridging loan is a short-term form of commercial finance that helps to plug a gap while you put longer-term funding in place. A common example is a business owner who wants to buy commercial property but hasn’t finalised a mortgage. The bridging loan allows you to proceed with the transaction while you complete the mortgage deal.  

Although the maximum term of a bridging loan is up to one year, it’s not uncommon for a loan to last for several months or even just a few weeks. Their short-term nature means that bridging loans typically come with higher interest rates than other types of business loans. The interest is usually calculated monthly rather than annually and can be rolled into the total cost of the loan, so there are no repayments to make during the loan’s term. 

What are the different types of bridging loans?

There are a few things to consider when looking for the right bridging loan for your business:

• Open or closed

An open bridging loan has no set date for repaying the loan, so you can decide how much you pay off and when, as long as you repay the loan within 12 months. This may suit you if you plan to repay the loan by selling a commercial property but don’t have a completion date yet. 

A closed bridging loan has a fixed repayment date. In this case, you might have a completion date for the sale of a property so you can repay the loan after that.   

• First or second-charge bridging loan

A first-charge bridging loan is the only loan secured against a property. In this case, if you default on the repayment, the lender will be able to recoup the value of the loan from the security before any other lender. 

You can use a second-charge bridging loan if you already have a loan that’s secured against a property. In this case, the bridging loan lender will be the second in line to recoup their money if you default. This added risk means the rates are typically higher and loans can be more difficult to get hold of. 

• Fixed or variable interest 

A fixed interest rate stays the same across the loan’s term, so all the repayments are equal. This type of bridging loan tends to be more expensive but provides more security and can help you budget.

With a variable interest rate, the rate you pay can change in line with the Bank of England base rate, so your payments can go up and down.

What are the benefits of bridging loans?

If you need short-term finance for a specific purpose and have an asset you can use as security, a bridging loan could be the answer. The benefits are:

• You can arrange a loan quickly and the money can be in your account within 48 hours
• There’s flexibility with open or closed loans terms and fixed or variable interest rates
• You can borrow large amounts if you have valuable assets
• It’s possible to get a bridging loan with a poor credit rating

However, you should also keep in mind that if you fail to make the repayments, your critical business assets could be at risk. There may also be other costs, such as arrangement, valuation and exit fees, which can push up the total cost of the loan.

Am I eligible for a bridging loan?

Bridging loans are designed for a specific purpose, so the lender will ask you what the money is for before you get the go-ahead. You’ll also need to provide security for the loan, which is usually an existing property or the property you want to borrow the money to buy. 

Crucially, you’ll also need to show that you have an exit route to repay the loan at the end of its term. That could be by selling property, refinancing or entering into a commercial mortgage.  

Find the right bridging loan for your business

At UK Business Finance, we can help you find bridging loans that match the needs of your business at the best rates. There are no fees to pay or exclusivity contracts to sign. Request a quote online or get in touch via phone or email to discuss your requirements with our team.

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