Bridging loans

A bridging loan is a short-term interest-only loan available to those that need immediate access to capital. Usually used for a property purchase, it is a loan to ‘bridge’ the gap while other finance (such as a mortgage or sale of property) is secured by the borrower. Bridging finance is secured, meaning the borrower uses property (or land) as security to the lending institution.

Any individual or limited company can apply for a bridging loan.

Bridging loans are mainly used by clients who need quick, short-term capital to fund a property purchase. They include those who:

• need to complete quickly. This might include property developers, who often have the opportunity to secure a great deal if they can complete quickly.
• buy through a property auction. Here, completion has to take place within 28 days, which means traditional financing is not usually an option.
• want to buy an uninhabitable property. Traditional lenders will often not lend on a property if there is no kitchen, bathroom, central heating or running water (especially buy-to-let mortgages). But a bridging lender will base its lending on the property’s value in its current condition. This enables the buyer to access the property and work on it to make it habitable.
• are renovating or developing a current property. A property investor may want to renovate a property within a few months and either sell on their investment or refinance. A bridging loan is often the perfect vehicle for this short-term capital requirement.
• have to get planning permission. In order to obtain permission and secure development funding, the developer may need immediate access to capital.
• need a lease extension. When a property has a short lease, a borrower will likely be refused a traditional mortgage. A bridging loan can be used to extend the lease, which then makes the property mortgageable through conventional lenders.

Your client can borrow against residential, semi-commercial (such as a shop with residential units above it) and commercial properties - in any state, including half built or fire damaged. We can also arrange lending against land, with or without planning permission.

As bridging loans are for the short-term, each client must have a plan in place to pay off the loan. This is known as an ‘exit route’ or 'exit strategy'. A viable exit route is a must on all bridging loan applications. Typical strategies include sale of property or refinancing onto a longer term mortgage.

A bridging loan can be taken out from one day up to 18 months.

The minimum amount for a bridging loan is £26,000. The maximum is subject to LTV and property value, and is typically at 80%. We work with lenders who will go to 100% LTV with additional security. At Enterprise Finance, we have vast experience in securing multi-million-pound loans.

Our experience means that in most cases we will be able to confirm almost straight away whether your client’s application is likely to be successful.

From the initial enquiry through to completion, our average turnaround time is between two and three weeks.

This depends on the borrowing circumstances. However, interest rates are usually between 0.44% to 1% for each month of the loan, and the borrowing is done on an interest-only basis. There are no Early Redemption Charges, but a minimum of 1 month's interest will apply.

Yes, clients can repay a bridging loan at any time, typically with no early repayment charges (ERCs).