In This Article
What is a commercial bridge loan?
A commercial Bridge loan is a short-term finance facility used to purchase or refinance a commercial building or development.
The commercial Bridge loan is the design to be taken for a short amount of time, for instance, twelve months.
Within this period or at the end of the term, the commercial bridge loan would either be re-financed to a standard commercial mortgage, or the asset sold with the bridge loan then being paid back.
A commercial bridge loan will usually be taken when there is urgency around the commercial transaction or if the security is not currently fit for a standard commercial mortgage.
For instance, if you were buying a pub that needed significant refurbishment for it to be able to trade again, it may be that a commercial mortgage would not yet be possible due to the property’s condition.
This is where a commercial bridge loan may be the appropriate solution to buy the pub, carry out the works needed and refinance to a standard commercial mortgage in the future.
If you plan to do this, you need to be sure that you not only qualify for the bridge loan but you will also meet the criteria for the commercial mortgage in the future.
Speaking with an experienced commercial mortgage advisor is always worthwhile so that there are no surprises when you come to refinance your commercial property in the future.
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Can a company get a commercial bridge loan?
Commercial bridge loans can be taken by either individuals or companies that wish to purchase or refinance a commercial property.
The commercial bridge lender would need a full overview of the complete situation in both instances.
This means understanding the financial situation of the individual borrower or the limited company director.
Commercial bridge lenders are not usually concerned about whether an asset is bought in the name of a person or a company.
It would be best to always take professional advice when considering whether to hold property in your personal name or within your business.
Once the property is held in a certain way, it can be costly to transfer it to another entity therefore getting it right at the outset is extremely important.
If there is a difference in rates and fees due to the ownership of a property, a commercial bridging broker will be able to explain the differences to you.
Your commercial Bridge broker will likely be a member of the National Association Of Commercial Finance Brokers (NACFB).
How do you refinance a commercial bridging loan?
A commercial bridge loan is a short-term finance agreement that needs to be repaid at the end of the term. A common term for a bridging loan is twelve months.
If you do not plan to sell the property, you usually refinance it by taking a standard commercial mortgage.
A standard term commercial mortgage is a mortgage that is used to finance commercial properties.
Similar to a commercial bridge loan, commercial mortgages can be lent to either an individual or a limited company to purchase or refinance a commercial property.
Commercial mortgages are available against all commercial properties such as offices, shops, factories, hotels, pubs, warehouses and housing developments.
Suppose the commercial property is to be occupied by the mortgage applicant. In that case, the commercial lender will need to fully understand the applicant’s business to ensure that the company is financially healthy so they can make payments on the commercial mortgage.
Suppose the applicant intends to let the property to an alternative company for them to occupy. In that case, the commercial mortgage lender will usually wish to see full details of the proposed tenant to ensure they are happy to lend in this situation.
Commercial mortgages are usually on a repayment basis and can be over a long-term, for example, twenty years.
Products, rates and terms vary across different lenders and change regularly.
As a result, if you wish to find more up-to-date information about commercial mortgages, you should look for an experienced commercial mortgage advisor who can give you your options.
If you would like I NEED ADVICE to match you with an experienced commercial mortgage advisor to tell you what you need to know. Please complete the contact form.
Do you need a deposit for a bridge loan?
Getting a commercial bridge loan can be possible even if you do not have a deposit.
However, the commercial bridge lender needs a certain amount of equity available, even if it is not within the property bought with the bridging finance.
For instance, if you wish to buy a factory for £500,000 and do not have a cash deposit to go towards the property, there may still be a bridging lender available offering you a bridge loan of £500,000 to buy a property.
If you were to own another commercial property, for example, worth £750,000, with a £250,000 commercial mortgage against it, a commercial bridge lender may be willing to secure part of the finance to the new property while securing the remainder of the finance as a second charge against the existing property.
This would mean that the full £500,000 is raised with the loan being secured against two assets.
Not all lenders will offer this, so best to find an experience bridging loan advisor who can tell you your options.
Can you get a commercial bridging finance if you have bad credit?
Bad credit does not usually stop you from getting a commercial bridge loan.
As with most bridging loans, the interest is retained and paid when the commercial bridge loan is redeemed.
As a result, commercial bridging lenders are not relying on you to make monthly repayments on loans.
Adverse credit may mean paying a premium for the bridge loan, as not all lenders are available.
Adverse credit can come in many forms, such as bankruptcy, individual voluntary arrangements, County Court Judgements, arrears, missed payments, debt management plans, defaults, and more.
If you have had bad credit, tell your bridging loan advisor the full details of what it consisted of and when it took place.
Your bridge loan advisor can then look for a bridging lender to accommodate the loan, considering your adverse credit.
You can visit Check My File to sign up for a free trial to learn more about your credit history.
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Can I get a bridge loan for development?
Commercial bridge loans, such as housing estates, are also available for property development.
For instance, if a housing developer owns a plot of land and wishes to raise money to finance the development.
In this instance, they could look to raise the money by way of a commercial bridge loan to build the properties whilst the development remained unable to secure a standard commercial mortgage.
Once the properties have been built, the property developer could look to exit the commercial bridge finance by selling the properties or a commercial remortgage to a term loan.
Should I use a broker for these type of loans?
A commercial bridge loan is a specialist transaction, so it is recommended that you take professional advice from a commercial bridging broker.
Commercial bridging loans are more expensive than standard commercial mortgages, so applying for one without the correct advice could be costly.
It is essential that you find a commercial bridging loan broker that has experience in transactions similar to your own.
Mortgage advisors differ based on the transactions that they arrange regularly. For instance, some mortgage advisors specialise in first time buyers, whereas some have a large background in shared ownership mortgages.
In this case, with a commercial bridge loan, not all mortgage advisors will have experience in arranging such transactions.
This is why it is important that you are selective when choosing your broker, to be sure to ask that they have the correct experience necessary to help you.
Could a first time buyer get a commercial bridging loan?
Getting a commercial bridge loan may be possible even if you have not previously owned a property.
Bridging loan lenders would need to fully understand your experience and situation when underwriting you for a commercial bridge loan.
However, your status as a first time buyer will not stop you from getting a commercial bridge loan as long as the lender is happy that you meet the criteria for the lending and that it makes sense to proceed.
Conclusion
Commercial bridge loans are short-term finance facilities taken against commercial properties.
They are usually taken when the property is unsuitable for a term mortgage or if the transaction is urgent and a fast completion is needed.
Commercial bridge loans can be lent to either individuals for limited companies.
Getting a commercial bridge loan may also be possible if you are a first-time buyer or have bad credit.
If you are taking a commercial bridge loan, it is imperative that you have explored whether you qualify for the refinance if you do not plan to sell the asset.
This is to stop you from getting stuck on a commercial bridge loan, as this would be expensive.
Getting expert advice from a competent commercial bridging broker is crucial when taking a commercial bridge loan.
If you would like I NEED ADVICE, to match you with an experience, qualified bridging broker. Please complete the contact form.
The information on this page is not tailored to any individual readers and should not be considered financial advice under any circumstances.
If you are seeking advice about a mortgage, you should consult a qualified professional.
