Your Guide to Commercial Bridging Loans

Aug 25, 2022

George Holmes

George Holmes

Managing Director + Co-Founder

Most businesses will need extra funding every now and then from a lender. The reasons for this vary – some businesses only need a small cash injection to tide them through a tricky month, whereas others need more money to scale up their business in accordance with a defined time frame. In either instance, commercial bridging finance can help.

What is a commercial bridging loan?

A commercial bridging loan is the term used to describe a short term loan used on a commercial premises. Commercial bridging loans offer more flexibility than other types of loans, with lenders willing to fund projects for most business purposes. From commercial property purchases to securing a new asset or offsetting multiple other types of loans, a bridging loan can be used for almost all commercial purposes, provided you have a viable exit strategy.

What can a commercial bridge loan be used for?

As mentioned, you can use commercial bridge loans for almost all business applications. They are most commonly used for property purchases and renovations until a mortgage application goes through or a property is sold. This is known as a bridging loan for commercial property and offers a faster alternative to traditional development finance

If you have assets and one of them breaks, you might not have the immediate capital required to get a new one or pay for the repairs. In this instance, a bridging loan could help you bridge the gap between securing the asset and securing another type of income to pay for it.

It’s common for businesses to encounter cash flow issues from time to time. In this instance, you will have suppliers and workers to pay, and materials to purchase for your business to keep business going as usual. An issue with cash flow could halt this and result in bigger problems down the line. A bridging loan can be used to ensure an undisrupted cash flow, allowing you to keep your business going until you get a cash influx again.

It’s worth keeping in mind that bridging loans are high value and incur high fees and interest compared to other types of borrowing. If you’re having cash flow issues, there are other types of borrowing available which may be more suitable, especially if you don’t need a huge amount of money all at once.

Commercial bridging loan rates

Generally speaking, bridging loans last for around 18 months, making them a short-term solution. The interest is payable every month and sits anywhere between 0.55% and 1.5%. On top of this, the majority of lenders will require you to pay an arrangement fee of around 2%, and assets or property will be used as collateral for the loan. Most lenders will also need to see an exit route for the loan before they agree to lend. This is because of the short-term nature of the loan. Some lenders require an early exit fee, but this isn’t always the case. The debt secured through a commercial bridging loan is held against property or assets.

Apply for a bridging loan at Aurora Capital

Please contact us if you have any questions about bridging loans and whether one is suitable for your commercial needs. Alternatively, apply for a bridging loan online today to be matched with the right lender with the best interest rates.

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