What is a bridging loan?
A Bridging Loan is a lending facility offered to a business or individual using the security of a tangible asset; the business premises, other properties they hold within their portfolio, or their residential home. Bridging Loans are generally offered on a short term basis of up to two years in length. They are often sought where a business has an urgent requirement for funding; whether it’s a cash injection for an urgent contract, or they wish to purchase additional property that they may lose if an immediate purchase is not made.
Whilst a business may have been advised that their bank will offer them a loan, the bank process can be extremely lengthy with turnaround times of up to six weeks and beyond. A Bridging Loan can provide immediate cash injections, allowing the business to utilise funds whilst waiting for their own bank’s loan process to complete. Once the bank loan funds are available, the bridging facility is simply paid off in full.
Bridging Loans are often turned around in very short timescales due to the urgency. Timescales can be as quickly as seven to ten working days, dependent on acting solicitors and availability of the surveyors. The bridging funder will have a number of surveyors on their panel, increasing the turnaround speed.
The assets accepted as security are generally buildings or land. A valuation would be required in order to ascertain the true market value of the asset, together with a value for lending purposes. The costs of the valuation will be covered by your business in full. The valuation must be completed by a surveyor from the funder’s approved panel.
Once the valuation of the asset has been completed, the lender would look to take a legal charge over the asset(s) before the funds are released. The maximum LTV (Loan to Value) usually advanced against the valuation for lending purposes is 65% on Commercial property and 70% on Residential property.
How much can we borrow?
Typically between £26,000 and £5M (higher values may be considered)
What term can I take the loan over?
Between 6 months and 24 months.
How do we repay the loan?
With a Bridging Loan, you will pay interest on the outstanding value each month and then repay the loan in full at the end of the term. Most bridging funders will also allow interest to be rolled on to the point of final repayment, if cash flow is tight throughout the loan term.
What security will be required?
- A legal charge will be taken over the asset prior to the release of funds
- Personal Guarantees and Debenture may be required
What do we need to qualify?
- No minimum trading term
- No legal notices or insolvency proceedings
- Defaults must be over two years old and not more than £1,000 in value, or a reasonable explanation must be provided/evidenced
- Be a registered business within the UK
- A full financial assessment will be completed to prove ability to service the debt
- UK bank account
What will we need to provide?
Firstly, the online application will need to be completed. Once this has been done, you will need to send the following information to email@example.com
- The last three month’s bank statements
- The last full set of financial accounts
- Balance Sheet and Profit & Loss
- Draft accounts (if the full year end accounts are over 12 months old)
- All directors to complete an asset and liability statement (click to open and save form)
- Please note that some lenders may request projections. We will advise if these are required.
- Your application will not be processed until we have received all of the requested information listed above.