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