Bridging loans explained
When you need quick, short-term access to funds, bridging finance might be the perfect solution. Bridging loans are always secured against a property asset and can offer funding while your company is waiting for a property sale or for long-term financing.
Bridging loans are used as a solution for those requiring quick access to funds over short term. It has to be secured against a property asset and is often used as an interim solution when a company is waiting for property to be sold or long term financing to be secured.
Often used in property purchases, they can also be used by businesses to raise capital, make asset purchases, or refurbish property. By offering quick release of funds, they 'bridge' the gap between the need for available funds and longer term financing solutions, such as a traditional mortgage or other loan.
Depending on the use and criteria, rates currently start from 0.43% per month and for a term of usually up to 12 months, albeit longer periods can be negotiated either at the beginning or throughout the initially agreed term of the bridging loan.
Bridging Finance Calculator
Use our bridging finance calculator to work out if you can afford your bridging loan or how much it could cost you.
What is a bridging loan?
Bridging loans are used to ‘bridge’ the gap between upcoming debts and source of credit becoming available. Therefore bridging loans are a popular short-term funding option.
How does bridging finance work?
Like other types of loan, bridging finance is a loan secured against your property. In this respect, it can be seen as a short-term mortgage. By giving you access to these funds, you can make use of them at a time when your long-term finance or property sale is still pending.
Bridging loans are popular in property purchasing situations because they allow you to 'break' the property chain and proceed as though you have the benefit of a sold property. This can help you speed up the process of purchasing new property.
It can also be used as a way of raising capital quickly. For businesses, bridging finance is a way to bring a product to market quickly while long-term financing is still being arranged. A bridging loan can also be helpful if you need to purchase business assets quickly and long term financing is going to take too long.
Of course, bridging finance is not right for every situation. It does require property assets for security and the repayment terms are often less than a year. Interest rates start at 0.43% per month, depending on use and other criteria. While this can be an affordable option, these rates often work out higher than the APR of a longer term loan.
Bridging loans can help you take advantage of other benefits, too. You might be able to negotiate a better purchase price or make an auction purchase by having immediate finance in place before a long-term loan would be available. In any case, it is often best to compare the different loan options available to find the solution that gives you exactly what you need at the best price.
Pros and cons of a bridging loanAdvantages of bridging finance
- Quick access to funds, with many lenders working to release bridging finance within 24 hours
- Allows you to purchase a new property before your current property has sold
- Options for repaying before or after long-term financing is secured
- Release of built-up equity and asset value
- No long-term repayment burden
- Ability to raise capital quickly for new investments
- Reduced risk of chain collapse in a property purchase
Benefits of our bridging loan comparisonUp to 85% Loan to Value (LTV)
A bridging loan requires a property as security – you could borrow up to 85% of the property’s valueBridging loan rates as low as 0.65% per month
As bridging finance is a short term loan option, you can get affordable rates, starting as low as 0.65% per monthPurchase a property before your current property has sold
A bridging loan is designed to 'bridge' the gap between two property purchases so is helpful when you’re struggling to sell your current propertyShort term, flexible finance option
Options include repaying before or after long term financing is secured and having the funds within 24 hours