What is a commercial bridging loan?
Commercial bridging loans are short-term financing options, which help you access money quickly to fund a commercial property purchase or another business related purpose.
These solutions allow you to seize time-sensitive opportunities or overcome temporary financial constraints.
Being able to access funding quickly can often make or break an investment opportunity. Therefore, these loans can be very valuable. However, interest rates are usually higher on these products compared to longer-term options. So it’s important to factor this in when you’re making any decisions.
When might you need a commercial bridging loan?
Typically, these loans are used when there is an urgent need for funds or when it would be challenging to get a commercial mortgage. Some examples could be:
- Auction purchases: Auctions move very quickly. In such time-critical situations, a fast funding option like a commercial bridging loan may become essential to ensure a successful completion.
- Rapid completion requirements: In certain situations, where time is of the essence, these loans are used to ensure a timely completion.
- Property refurbishment: This option is commonly used to fund refurbishments of commercial properties. In some cases, the property may not be in good condition, making it hard to get a commercial mortgage. By using a bridging loan, you can get the funding for renovations. Once the property has been refurbished, you can move over to a commercial mortgage or sell it to pay off the loan.
The most important thing is that you have a clear exit strategy (a plan to repay the loan). Without having this mapped out, lenders are unlikely to consider your application.
Advantages of commercial bridging loans
Quick funding:
One advantage of commercial bridging loans is their quick turnaround time. Some loan processes can be time-consuming, whereas, these solutions are designed to give you fast access to funds. This can be beneficial when you’re facing time-sensitive opportunities or have urgent financial needs.
Short-term commitment:
Commercial bridging loans are short-term financial solutions, which can last up to 24 months. This can be beneficial if you need temporary funding, such as during property purchases, renovations, or while waiting for longer-term financing options.
No monthly payments:
In many cases, you are not required to make monthly payments on the loan. Instead, the interest is usually added to the loan balance, and the full amount is repaid when the term ends.
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Disadvantages of commercial bridging loans
Higher interest rates:
Due to their short-term nature, lenders often charge higher interest rates. This can result in higher overall borrowing costs. It is therefore important for you to carefully consider the interest rates and assess whether the benefits of the loan outweigh the expense.
Property is at risk:
These loans are secured against a property, which means if you are unable to fulfil the repayment obligations, you could risk losing it. Your lender may repossess the property to get the money they lent to you back.
Defaulting on a loan can have serious consequences, such as harming your credit score. This may make it harder to get future financing. Therefore, it is crucial for you to have a clear repayment plan in place to lower risks.
Exit strategy:
You need a clear and viable exit strategy to repay the loan when the term ends. If you don't have a solid plan, you may find it very hard to get accepted in the first place.
Why pick The Loans Engine for a commercial bridging loan?
We have strong relationships with a range of bridging loan lenders. This means we may be able to find you a competitive loan that matches your specific needs.
Our experts understand the complexities of commercial bridging loans and can guide you through the process. Through this, you can make informed decisions, considering all the relevant factors for your business.
By choosing The Loans Engine, you can benefit from our experience, wide network of lenders, streamlined application process, and expert guidance.
Remember before you consider taking out this option, make sure you think carefully about if it is affordable for you. If you struggle to repay your loan, it could put the property you have used as security at risk of repossession.
How do I apply?
Getting in touch with our experts is simple.
You can have a conversation with one of our advisors over the phone on 0800 032 3535 (all calls are free).
Alternatively, click ‘enquire now’ on our online form above and submit your details to request a call from one of our team.
Someone will get in touch to go over your application and see if we have a solution that matches your plans.
