Bridging Loans for Small Businesses

Try our online comparison tool

Compare quotes instantly and apply online

Takes around 4 mins

Or talk to an expert

Why use our comparison tool?

  • Compare the total costs of taking a bridging loan
  • View your product comparison instantly
  • Apply online or request more information

Want to read more before you apply?

Home » Bridging Loans » Types of Bridging Loan » Bridging Loans for Small Businesses


Bridging loans booming for small businesses

The bridging loan industry is booming at the moment, with more and more lenders entering the market. This has driven intense competition between lenders, which can only be a very good thing for potential borrowers.

As the cost of bridging finance has dropped so sharply over recent years, they are fast becoming a great option for SMEs who are looking an alternative to traditional mortgages to secure property quickly. We’ve put together this bridging loans guide to help you learn more about how small businesses can benefit from bridge finance.

What is a bridging loan?

A bridging loan is a short-term, interest only loan, which is secured against property in much the same way as a mortgage or secured loan.

For more, read our detailed guide to bridging loans.

How do they work?

These loans are usually offered for a maximum term of 18 months, although some lenders will offer longer. Loans secured by first legal charge against your own home are restricted to a maximum term of 12 months.

The interest is usually added to the loan and paid as a lump sum when the loan is repaid.

How do bridging loans benefit small businesses?

There are several reasons why small business owners should consider enquiring about bridging loans through an accredited broker when raising capital and, in this bridging loan guide, we will break down some of the more common ones.

As short-term bridging finance can be arranged quickly and with less onerous underwriting than other types of borrowing, depending on the lending terms, which vary from lender to lender, you can access very competitive interest rates and flexible repayment options provided your exit strategy is fit for purpose. This short-term loan method can be a great tool for small business owners looking to expand.

This allows decisions to be made quickly and with less time required to manage your application – especially when guided by a trusted commercial finance broker.

Using bridging loans to purchase a property

When a business owner is looking to purchase a property, a commercial mortgage would usually be the most suitable product. There are exceptions to this, however.

Firstly, when the property purchased needs heavy refurbishment or even change of use, a bridging loan would usually be more appropriate. This is because most lenders would not allow such heavy works to be undertaken on the property as part of the mortgage.

In this scenario, bridging finance would be taken out, the works completed and then the loan can be refinanced into a mortgage.

Where the works are going to result in an increase in the value of the property, you may also be able to borrow the cost of the works.

The second situation is when a transaction must be completed quickly. Commercial mortgage applications can take time and as such, they aren’t always appropriate when completion is urgent. This is common for auction purchases and when there have been issues with a mortgage application that means you must now complete quickly.

In both of these scenarios, it’s realistic to arrange a commercial bridge loan in around 14 days.

Using bridging loans when raising capital to fund a shortfall in cash flow

Where there is a need for a cash injection into your business and there is equity available, bridging finance could be an ideal option.

Unsecured business loans should also be considered; however, most lenders require a clear credit history and have strict lending criteria. As above, a commercial mortgage wouldn’t be appropriate where funds are required urgently.

By taking out a bridging loan and rolling up the interest, you would also benefit by not having monthly repayments to make. This can be particularly useful when cash flow is tight.

Choosing the right bridging finance to get your small business up and running

When looking to take out a bridging loan for your small business, there may be a number of ways to arrange the loan. If you already own the property that your business will be trading from, a commercial bridging loan could be the right option for you.

Alternatively, there may be cost savings to be made by taking the loan out against your home. This does come with higher risks should you fail to repay the loan, as your home may then be at risk.

When taking out a new bridging loan, it is recommended that expert advice is taken to reduce the risk as much as possible.

Are these loans regulated?

Bridging loans for business purposes aren’t regulated, unless they’re secured by first legal charge against your own home.

Although these loans aren’t regulated by the FCA, you can deal with reputable lenders to protect yourself and your business.

What other finance products are available to small businesses?

When looking to raise finance quickly, the most natural alternative to a bridging loan would be an unsecured business loan. These can also be arranged in under 2 weeks, although the lending criteria are much stricter, and some may not qualify.

Longer-term borrowing which is less urgent may be much cheaper using a commercial mortgage or secured business loan. Both take a number of weeks to arrange and offer longer terms but will come with much lower interest rates in most cases.


About The Author

This content was produced by our Commercial Lending Director, Gary Hemming. Gary has over 15 years’ experience in financial services and specialises in bridging loans, commercial mortgages, development finance and business loans. He is widely respected in his field and regularly provides expert commentary for specialist trade publications, specialist business press as well as local and national press.

Gary Hemming CeMAP CeFA CeRGI CSP  -  
Commercial Lending Director

Want to Know More…?

Use the panels below to read more.