Bridging finance for business owners are short-term loans until the main funding, such as a business mortgage, is in place. Business bridging loans are usually large amounts of money between £100K and £5m for a minimum of three months to a maximum of 24 months (although there are some lenders who will lend for a term of up to 36 months).
If your business owns a commercial property or has private property to rent out, then it will qualify for a bridging loan. The loan amount is based on the value of the equity in the property and the loan to value ratio (LTV). Most bridging loan lenders will lend up to 75% LTV of the business property but there are some lenders who will lend up to 80%. Business bridging loan lenders are unregulated meaning they are not governed by the Financial Conduct Authority (FCA). This means that the big advantage of bridging finance for business owners is that no other checks, such as credit history, are needed which makes the application process simple, quick and straightforward.
There are many bridging loans lenders who will lend to business owners. You can do an internet search, but researching each individual bridging loan lender can be very time consuming and you are relying mainly on what information is available online. A comparison website will let you see some of the most competitive interest rates but you still have to research each lender individually; you need to find out what other charges there may be and find out how they rate as a bridging loan lender. Alternatively, you could use a broker who will do all of the hard work for you and find you the most competitive rate. Bridging finance brokers may also have access to lenders you had not considered.
As business bridging loans are short-term loans, the interest rates are quoted monthly instead of annually. The interest rates are typically higher than for long-term business finance such as commercial mortgages.
As the loans are based solely on the value of the business property, the only fees are usually the valuation fee. However, some lenders will charge additional fees such as arrangement fees to cover the cost of setting up the loan, exit fees if you want to pay the loan back early, administration or repayment fees for the paperwork when the loan finishes. There may also be legal fees and a broker fee. Not all lenders charge these fees so do make sure you are aware of any additional fees before you take out the bridging loan for your business.
With bridging loans your business does not have to pay back the loans and interest in monthly instalments. Interest is still added to the bridging loan every month, but it is rolled up and paid back in full when the bridging loan finishes.
If you would like to find out more about business bridging loans, please feel free to contact us.