What Is A Commercial Bridging Loan?

Similarly to a Residential Bridging loan,  a Commercial Bridge Loan are used when there is a gap in financing that needs filling quickly and easily.

A commercial bridging loan is solely used for business purposes rather than residential properties. If you’re:

  • An individual
  • A group (entity)
  • An existing business looking to expand

You are eligible for commercial bridging finance.

For a Commercial Bridging Loan the overall use of the property has to be more than 40% commercial. For example, if you were buying a retail unit with a at above it, the retail unit’s value would have to be more than 40% of the total value. For landlords, or a landlord company, the exit strategy would usually be to refinance the loan onto a Buy-to-Let Mortgage, usually after doing some renovations to make the property suitable for rental. For commercial units that are bought using a Commercial Bridging Loan, the exit strategy usually involves refurbishing the unit then selling it or refinancing onto a conventional Commercial Mortgage.

Bridging loans secured on commercial property are more specialist than those secured on residential property, meaning there are far fewer lenders in this market.

Commercial properties pose a greater risk to lenders when compared to residential properties, therefore loans secured against commercial properties tend to be more expensive than if they were secured against residential property.

This is further reflected in the type of commercial property being used as security, and the interest rates reflect the different levels of risk.

What can a Commercial Bridging Loan be used for?

Loans are secured on commercial or semi-commercial property. Semi-Commercial is commercial property that also has residential accommodation as part of the commercial premises. This could be owner occupied or rented out.

  • Shops
  • Offices
  • Restaurants
  • Factories
  • Industrial units
  • Care homes
  • Hotels
  • B & Bs
  • Leisure facilities
  • Shopping centres

They can also be secured on land:

  • Development land with planning permission
  • Land without planning
  • Farmland

Loans can be used for most purposes, including:

  • Buying property
  • Cashflow
  • Pay debts
  • Renovation, expansion, restoration of property
  • Purchasing

What are the Key Features of Commercial Bridging Loans?

There are many advantages of bridging loans when compared to other types of finance. When finance is only required for a short period of time, they often provide the cheapest option for raising the required funds. In addition they are fast to arrange, have flexible lending criteria so that approvals can be given quickly without extensive checks, and they can be secured on all types of property, including property that is unsuitable to other lenders. Commercial Bridging Loans can commonly be used for the below also:

  • Commercial Refurbishment Finance – Renovating, converting or restoring properties
  • Commercial Re-Bridging
  • Buying a commercial property at auction
  • For quick commercial purchases when a bargain property or other must have item comes along
  • Solve commercial business short term cash flow problems
  • Inheritance tax and probate issues from arisen from commercial ownership
  • Buying commercial property below market value
  • Repossession prevention of commercial property
  • Commercial property development
What are the Criteria for Commercial Bridging Loans?
  • Loan sizes: £50,000 up to £250m
  • Term: 24 Hours up to a maximum of 36 months
  • Security: A First legal charge will be required against the property
  • Property types: All types considered
  • Locations: United Kingdom, Ireland, Scotland, Wales, Spain, Netherlands, France, Germany, Australia,New Zealand, United States, Austria, Belgium, Switzerland
  • Types of Borrowers: Private borrowers, Limited companies, Partnerships, Offshore companies, SPV’s
  • Age of Applicant: Minimum of 18 years old
  • Acceptable Credit History: CCJs, Defaults, Arrears, IVAs, Bankruptcy, Repossessions, Statutory Demands, Winding up orders
Commercial Bridging Loan Exit Routes
  • Property or asset sales
  • Receipt of money owed
  • Inheritance
  • Refinance
  • Policy reaching maturity

What information would I need to provide?

  • Applicant company name & number.
  • Directors & significant shareholders CV’s or Biographies.
  • Full site/ property address.
  • Copy of the planning consent. If any
  • Financial Appraisal (can exclude finance costs) and Cash-Flow.
  • Detailed build or refurbishment costs.
  • Schedule of proposed Accommodation.
  • Details of the professional team (contractor, architect, structural engineer, CDM coordinator etc).
  • Procurement Method (For example, Design & Build or Construction Management?).
  • Any comparable sales information (or agent’s opinions) to support the proposed GDV.

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Commercial Bridging Finance November 9, 2019