Generally speaking, bridging loans can be used for the majority of business-related purposes, but they’re most commonly used in order to acquire property. For example, if you want to purchase a new property for your business, or if you’re a landlord and want to buy a new property to add to your portfolio, you’ll need a mortgage. However, mortgages can take a while to be approved, in which time you could end up missing out on the property – especially if it’s being sold at auction.

In this instance, a bridging loan would provide you with the money to purchase the property until the mortgage was approved, ensuring you don’t miss out. When your mortgage is approved, you would use it to pay off the bridge loan.

Alternatively, you can use a bridging loan to fund renovations until your property is sold, to buy new equipment until an alternative loan is secured, or to solve cash flow issues until you can pay back what you owe (although there are better options for this available).

Bridging finance is usually relatively quick, with decisions in principle offered within 24 hours. The time scale it takes to complete is often between 5-18 days, however this does depend on a few factors beyond our control, such as 2nd charge consent (if applicable), the availability of local surveyors, and your solicitors.

When you compare bridging loans, you will usually be able to compare the speed at which you will be able to access the funds based on how much you are needing to borrow. Variable factors will depend on the individual lender.

At Aurora Capital, we provide access to a large pool of lenders who can offer bridge loans. These lenders will differ significantly in terms of broker fees, exit fees, legal fees and so on, but we will be sure to match you with the most appropriate lender according to your project specifications and other needs.

In addition to the standard interest rates, the cost of a bridging loan will also depend on:

• Lender arrangement fee: Charged for the arrangement of your bridging loan and payable to the lender
• Broker fee: Charged for the processing of your application
• Valuation fee: A basic survey of the security property, usually payable early in the application process
• Legal fees: Some lenders will require separate legal representation which needs to be paid for by the borrower
• Exit fee: Sometimes charged on repayment of the loan

Note that most commercial bridging finance options are limited to 18 months before full payment is required. But with high interest rates usually charged per month rather than over the full loan term, it’s recommended to pay off early to avoid paying large fees.

All types of businesses that have either a commercial or residential property, or other types of redeemable assets to secure on, can get a bridging loan. How much you are able to borrow is calculated based on the value of your asset, so to get the best bridging loan rates with reasonable monthly interest, you will need a property with a good amount of equity available.

One of the biggest risks of using a bridging loan is the fact that you may not have an agreed exit. Seeing as all bridging loans will need to be repaid after the agreed term, you will need a planned exit. This puts your business at risk, with the chance of necessary assets and property being reclaimed to make your payments. If you haven’t considered how you will exit your commercial bridging loan, it’s recommended to hold fire and get assurances beforehand.

Speak to our team for some helpful advice on commercial bridge loans.

Bridging finance and development finance both provide businesses with short-term injections of cash to help finance assets and buy or renovate property. Once the funds are used and the project has been completed, both types of loan need to be repaid. The key difference is the fact that development finance is restricted to development projects and can last up to 3 years. Bridging finance, on the other hand, is commonly used for light development work and working capital requirements and will generally last up to 24 months.

If you feel you need support understanding the risks involved with bridging loans, consider speaking to our team or looking at other funding options with Aurora Capital, such as development finance.