In This Article
What is commercial bridging finance?
Commercial bridging finance, otherwise known as commercial bridging loans, are short-term finance facilities to bridge the gap when a standard facility is unavailable, or there is urgency in the transaction.
For instance, if you are purchasing a commercial property that is structurally unsound or only half built, it is unlikely that a standard mortgage lender would be able to lend. In this scenario, bridging finance may be the answer.
Also, if you were looking to buy a commercial property but do not have the funds available until another asset has been sold, bridging finance may be the solution to buy the property and repay the bridging loan once the sale proceeds from the alternative asset are available.
Commercial bridging finance is available for a certain period, such as 12 months.
You can repay the bridging loan during this time or at the end of the agreed term. People usually repay their commercial bridging finance by selling the security property or refinancing the loan.
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Should I use a mortgage broker for a commercial bridging loan?
Commercial bridging finance is a specialist area. As a result, it is recommended that you look for an experienced bridging loan broker who can tell you your options.
As bridging finance is not cheap, it is important that you get the correct advice at the outset to avoid any further costs.
Different bridging loans will suit different people depending on their situation and the property.
It is important to know how you plan to repay your bridging finance.
For instance, if you plan to sell the property in the future, make sure that you have done your due diligence on conservative sales values to be sure that you can afford to go through with the transaction.
If you intend to repay the bridging loan in the future, make sure that you have spoken to an experienced commercial mortgage adviser to ensure that you will be able to refinance the property to repay the loan. Most bridging finance brokers will be members of the National Association of Commercial Finance Brokers.
If you would like I NEED ADVICE to match you with a bridging loan broker who can tell you your options, or a commercial mortgage adviser who can give you advice on repaying your loan in the future. Please complete the contact form.
What kind of properties are acceptable on commercial bridging finance?
Commercial bridging finance is available on a wide range of commercial properties.
For instance, the bridging finance may be the answer if you want to purchase or refinance offices, warehouses, pubs, hotels, shops or blocks of apartments.
Commercial bridging loans can also finance mixed-use properties where the building comprises a retail unit and a residential element (for example, a buy-to-let flat above).
Can commercial bridging loans be used for property developments?
Commercial bridging finance can also be used for developing properties. Depending on the level of development needed, it may be that the funds are released in stages throughout the build.
Bridging finance lenders would work on the GDV (gross development value) to assess the total loan, releasing the money based on the current value.
Commercial bridging finance is used by developers who have purchased plots of land and now wish to build properties.
At some point in the future, it may be possible for the developer to keep the properties and refinance them to standard term mortgages or to sell them and redeem the commercial bridging loan.
Whether the bridging finance is commercial or residential will depend upon your intentions with the property in the future.
If you plan to live in the property, it would likely be underwritten on a residential basis.
Speak with a bridging loan broker who can advise you on how the case would be underwritten and whether you would qualify for the finance.
Could a first-time buyer get commercial bridging finance?
First-time buyers can qualify for commercial bridging finance in some situations.
Not all lenders would be comfortable offering commercial bridging finance to first-time buyers. Still, some lenders, if they believe that the buyer has the correct experience to take the finance and use it successfully, some lenders will consider this.
For instance, if you are a first time buyer but own a company that is buying its first commercial building, but it needs work to complete, if the lender felt that you have the means necessary to complete it, met their criteria, and were able to refinance in the future, you would likely have options.
What kind of fees are payable for commercial bridging finance?
Commercial bridging finance is not cheap, and there are many fees to consider if you are taking it.
Standard fees for commercial bridging finance include lender arrangement fees, valuation fees, legal fees for both yourself and the lender, broker fees and sometimes redemption fees when repaying the loan.
Fees will vary across lenders and products, so it is best to ask a bridging loan broker what the applicable fees will be, based on your situation.
Can you get commercial bridging finance if you have bad credit?
It is often still possible to get commercial bridging finance, even if you have had bad credit.
Most bridging loan lenders arrange the loans to be taken on a roll-up basis so that interest is retained and repaid at the end of the term. This removes the need for monthly payments.
With the lender not relying on a person’s ability to make monthly payments, they can usually be more flexible with bad credit.
Bad credit comes in many forms, such as arrears, debt management plans, county court judgements, individual voluntary arrangements, company voluntary arrangements and bankruptcies.
You must tell your bridging loan broker the full details of your bad credit so they know which lenders may be available to you. If you want more details about your credit history, you can go to Check My File to sign up for a free trial.
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Conclusion
Commercial bridging finance is commonly taken for properties that do not qualify for term loans and when there is urgency in a transaction.
This may be because another asset has not been sold or the seller is unwilling to wait for a standard mortgage.
Commercial bridging finance is a specialist area, so it is important to take expert advice if you are considering a loan.
It is important to explore your bridging options, but you should also make sure that you do your due diligence on your ability to repay the loan in the future.
For instance, if you plan to take a commercial mortgage to repay the bridging finance, speak with a commercial mortgage adviser to ensure your plan is plausible.
If you would like I NEED ADVICE to match you with a commercial bridging loan broker or commercial mortgage adviser, who can offer you a free consultation. 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.
