Commercial Bridging Loans
Bridging Loans For Commercial Property
Find out how bridging finance works for commercial property transactions and get the best deal with ABC Finance
Over 30,000 loan-seekers helped
FCA Authorised – Fully regulated
Receive your funds in as little as 5 days
Market-leading interest rates
CeMAP Qualified Advisors
No Broker Fees
Author: Gary Hemming CeMAP CeRGI CSP
20+ years experience in bridging loans
Commercial bridging loans allow you to borrow money to buy or refinance a commercial property quickly.
A bridging loan is an ideal option for those who need to complete in a month or less and can’t wait for a commercial mortgage to be completed.
Commercial bridging loans explained
What are commercial bridging loans?
Commercial bridging loans are similar in nature to standard bridging loans, which is a form of short term secured property finance. Commercial bridging finance, as the name suggests, are bridging loans which are secured against commercial property.
They are short-term, interest only loans which are usually arranged for up to 18 months (although some lenders offer longer terms). They are used to secure funds quickly, often to fund a purchase or to release funds from commercial property when time is of the essence.
During the term of the loan, interest is usually added to the loan and repaid at the end, or sooner if the loan is repaid early. As such, there are usually no monthly payments to make. This is similar to the way interest is handled using a residential bridging loan or development finance.
How can bridging finance on a commercial property benefit me?
The main benefit is the speed, where a quick transaction is needed, bridging finance can be a huge benefit.
Alternatively, if the property is unmortgageable or isn’t fit for purpose, a bridging loan is a handy tool to enable you to carry out the required works.
What is commercial bridging used for?
Our commercial bridging loan products are often used to fund:
- Garage blocks, car parks and land
- Offices, such as single units or office blocks
- Professional practices
- Pubs, bars, and restaurants
- Hotels, guest houses and B&Bs
- Retail units and business parks
- Warehouses, factories and industrial units
- Large HMOs/unusual residential investments
- Mixed use property including semi-commercial
- Care homes
- Places of worship
Key product features
Key Features
Max LTV
Up to 75%
Interest rate
From 0.74%per month
Charge types
1st & 2nd charge
Term
1-36 months (maximum 12 months for regulated loans)
Interest type
Added to the loan, deducted or serviced
Completion timescale
5 days – 3 weeks
Criteria
Commercial, semi-commercial property or land acceptable
Available to individuals, partnerships, LLPs, Ltd companies, offshore companies, foreign nationals and pension funds
Minimum applicant age 18 years – no maximum age
Available in England, Scotland, Wales and Northern Ireland
Adverse credit accepted (on a case by case basis)
Loans from £25,000 with no upper limit
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Commercial bridging loan lending criteria
Will I qualify for this type of bridging?
Yes, to qualify you simply have to be able to offer suitable security for the loan, meet the lenders LTV requirements and have a solid exit strategy. If this is the case, you have a great chance of qualifying.
We work with the leading lenders from across the market, so can support most borrowers with their finance needs.
If you’re unsure whether you will qualify, get in touch and we will be able to advise you on your chances of approval almost immediately.
What loan term can you offer?
Bridging loans range from 1 month up to 36 months, in most cases 24 months is the maximum available. Typically you wouldn’t set up a bridging loan for only a month, however the term is arranged to suit your loan repayment plan, sometimes called your exit route.
The term of the loan should cover all eventualities and allow for delays in repayment, such as a property not selling or a refinance taking longer than planned.
If your exit route is to sell the security property, or another property, the loan term needs to be long enough for the sale to be realistic, this should really be a minimum of 9 months. Even if you have a buyer in place, you should allow cover for them pulling out or the sale taking longer than planned.
If you your exit plan is to refinance the bridging loan onto longer term finance, the loan term can be shorter and will depend on how long the refinance will likely take, again, a contingency should be in place.
The key is to ensure there’s enough time to be able to repay the bridging loan, otherwise the loan could default.
What checks will the lender carry out during the application process?
During the loan application process, the lender will assess the following:
- The reason for the loan.
- Your deposit or equity position.
- The property value and whether it provides suitable security for the loan.
- Your credit history, assets and liabilities.
Will I qualify if I have bad credit?
Yes, many commercial bridging lenders offer bad credit bridging loans and consider varying degrees of bad credit.
The severity of the adverse credit usually impacts the loan to value offered and the interest rate you will pay.
Not all lenders allow bad credit though so it’s worth checking this before you apply, a good broker will know exactly which lender to apply with.
Who can take out these loans?
We offer bridging finance for commercial real estate to the following borrowing entities:
- Overseas investors.
- Individuals, partnerships or LLP’s.
- High net worth (HNW) borrowers.
- Business owners.
- Property investors and developers.
- Limited Companies, including Offshore.
- Complex multiple ultimate beneficial owner (UBO) structures.
- Pension Funds.
How much can I borrow?
Minimum and maximum loan sizes
Your maximum loan with be determined by your property value, your chosen lenders maximum loan to value (LTV), the property type and how much you can afford to repay using your chosen exit strategy.
We can offer commercial bridging finance from £10,000 with no maximum loan size. We even offer a specialist range of large bridging loans for loans over £1,000,000. Development exit finance applications regularly see loan sizes above £3,000,000.
The maximum loan size will be dependent on your repayment plan. If you are to refinance onto a commercial mortgage, the lender won’t lend more than you’re able to refinance for unless you can evidence the shortfall.
Loan to value requirements
In most cases, the maximum LTV for commercial properties is 70% and 75% for semi commercial property.
With commercial property, the maximum LTV will usually be judged on the asset type and demand for re-sale should the need arise. This is to ensure that the lender is able to get their money back should the loan default.
For example, a high quality office space in an area of high demand will be able to achieve a higher LTV than a tertiary warehouse that is surrounded by vacant warehouse space.
If you’d like to know how much you can borrow based on your property, get in touch today and our team of experts will be able to tell you very quickly.
Does income affect my maximum loan?
In most cases income doesn’t usually affect your maximum loan, this is more common when you are selling the property to repay the loan.
If you are raising a mortgage to repay the loan, income will likely be assessed to ensure sure a refinance is achievable. If this is an investment property, they may work from the rental value and if the property is your business premises, they will assess business revenue.
Some non-status bridging lenders who offer unregulated bridging loans don’t ask for proof of income, regardless of the repayment plan.
Exit strategy & the impact on maximum borrowing
The exit strategy for bridging finance is essential and needs to be determined upfront.
The maximum loan is often determined by the exit strategy, and when looking at exit strategies for commercial bridging finance, this is usually broken down into 2 plans:
- Sale of property, the lender will want to be certain that the property will sell for enough to repay the loan, and the sale will go through in a reasonable time.
- Refinance, you may be refinancing onto a commercial mortgage. In this instance, the lender will look at the maximum loan on exit to determine their maximum loan offered.
Commercial bridge loan interest rates & costs
What interest rate will I pay?
Commercial bridging loan rates start at 0.74% however rates of 1% are not uncommon for high LTV’s, unusual property or properties with less demand. This means that the interest costs between £740 and £1,000 per month per £100,000 borrowed.
The interest rate will be priced on risk. Apart from the asset itself, this includes applicant profile including credit history.
In most cases, the interest can be added to the loan and repaid when the loan balance is repaid.
Are there other set up costs to consider?
On top of the interest charged, there are other set up costs that should be considered. They are:
- Lender arrangement fee – This is a fee charged by the lender and is usually added to the loan. Depending on the loan size, you can expect this fee to be 1-2% of the loan amount. Smaller loans tend to demand higher fees, and vice versa.
- Lender exit fee – Thankfully, these fees are becoming less common, but some lenders do charge an exit fee when the loan is repaid. If charged, it is usually equal to 1 month’s interest costs and can be added to the loan. It’s still worth considering loans with exit fees is the interest rate is lower, as it could still be a cost effective option.
- Broker fees – Most brokers charge a fee for arranging the loan, often 1-1.5% of the loan amount. At ABC Finance, in most cases we charge no broker fees.
- Valuation fee – This fee is payable to the surveyor to carry out a valuation of the property. It is paid early in the process and the cost depends on the property value, type and location. In most cases, the lender will arrange this, and you are unable to provide your own property valuation. In some cases, lenders will carry out a desktop valuation. This tends to be quicker and cheaper than a full valuation.
- Legal fees – This fee is charged for carrying out the legal work when setting up the bridge, and you are expected to pay both your own and the lenders solicitor costs. Some lenders will add their solicitor costs to the loan, however there may still be a full undertaking charged when solicitors are instructed.
Are there any upfront costs to pay?
In most circumstances yes, there are upfront costs payable before the loan completes. Valuation and legal fees are payable before completion of the loan. Some lenders will add solicitor fees to the loan.
If you require a product with no upfront costs, please let us know at the outset. This may be possible however you may pay a higher interest rate on your borrowing.
Do ABC Finance charge a broker fee?
For bridge loans of £100,000 or above, there are no broker fees.
How to get a commercial bridging loan
What is the application process?
The commercial bridging finance application process can vary lender to lender, but typically works as follows:
- You can discuss your enquiry with lenders yourself, or speak with a bridging loan broker with experience of dealing with the commercial finance market, to discuss your finance needs.
- When a suitable lender, and product is chosen, your application and supporting documents are submitted for review.
- The loan underwriter will assess your application and if happy to proceed, will instruct the valuation.
- When the valuation report is back, if the details are satisfactory the offer will be issued and solicitors instructed.
- Both yours, and the lenders solicitor will work towards a completion date and funds release.
Should I work with a broker or deal with lenders direct?
Working alongside an FCA regulated bridging loan broker is definitely advantageous, especially if they don’t charge broker fees. This is effectively a free bridging loan comparison tool. A good bridging finance broker will have many years of experience in the commercial finance market and will know exactly which lenders to deal with. Here at ABC Finance Limited our services include assisting with your application and liaising with the lender, valuer and solicitors for you. As we also arrange commercial mortgages, we’re on hand to assist with your exit strategy if needed.
You can of course compare options yourself, this involves speaking with commercial bridging lenders. Many lenders do work directly with the public, however speaking with multiple lenders and comparing loan offers, including interest rates and fees can be time consuming.
What documents will I have to provide?
To apply, both brokers and lenders will require the following documents:
- Application form including synopsis and loan repayment plan.
- Proof of identity (ID), i.e. Passport copy or driving licence.
- Proof of address, i.e. a recent utility bill or credit card statement.
- Latest 3 months bank statements.
- Proof of deposit for purchases.
- Proof of exit, i.e. a commercial mortgage decision in principle.
How long does the application process take to complete?
Commercial bridge financing takes around 2-4 weeks to arrange, ideal for auction purchases.
The key to completing your finance application quickly is to instruct the valuation and begin the legal process at the outset. Doing so will save a lot of time as these are the areas that tend to slow down completion.
Commercial property valuations can take a while, in some cases you can py a higher fee for a quicker turnaround. This is advisable when speed of completion is important.
Also, it’s worth noting that your choice of solicitor is key to securing funds quickly. Make sure you choose a solicitor that is highly experienced in bridging and has a full understanding of your timescales.
If you’re not entirely satisfied with your solicitor then we can recommend a bridging specialist who will make sure your timescales are met.
Frequently asked questions
Can I repay my loan early?
Yes, you can repay your loan early and at any point during the term. There may be a minimum interest amount payable, this is usually the first full months interest.
Some lenders charge longer interest earning periods, i.e. 3 months. If you only need the loan for a very short period you should discuss this upfront.
If you only need the loan for a very short time, you should consider whether this is suitable given the set-up costs involved.
Do I need to provide proof of income?
Most bridging loan lenders ask for proof of income as part of their loan packaging.
If you are repaying the bridge via sale of a property or asset, proof of income can sometimes be bypassed. However, if you are to refinance the loan onto a commercial mortgage, proof of income will likely be required to make sure this is achievable.
In some cases, an accountant’s reference or projected future income or forecasts may suffice.
What is the minimum deposit?
The minimum deposit needed is 30% plus fees and interest for the period.
The minimum deposit needed for semi commercial and mixed-use property is 25%, plus fees and interest for the term of the loan.
This is often case-by-case, therefore it’s worth discussing options with a bridging broker who will be able to assess this and compare bridging loans for you.
How do you pay back the loan?
This is called your exit strategy and can be repaid by either selling or refinancing the property, or by selling or refinancing another asset, as long as there is enough equity to do this.
For higher quality, in demand properties, you’re likely to secure the best bridging finance interest rates.
Bridging loan case studies
Second Charge Bridging Loan for Business Investment
Bridging Loan to Raise Capital and Consolidate Debt
