Bridging Finance

What is Bridging Finance?

Bridging finance—or a bridging loan—is a short-term loan designed to "bridge the gap" between a current need for funding and a future source of finance or liquidity. It provides quick access to capital, often within days, and is typically secured against property or land.

These loans are most commonly used in the property sector to facilitate purchases, refurbishments, or business needs when traditional funding (like mortgages or bank loans) is too slow, inflexible, or unavailable.

Key Features of Bridging Finance:

Short-Term: Usually lasts from 1 to 24 months, though most are between 6 to 12 months.
Secured Loan: Typically secured against property, land, or other valuable assets.
Speed of Funding: Bridging loans can often be approved and funded within days, far quicker than traditional bank loans.
Higher Interest Rates: Because of the short-term nature and speed, interest rates are higher than standard mortgages or loans—often charged monthly (e.g., 0.6%–1.5% per month).
Interest Options: Interest may be:
- Rolled up (paid at the end)
- Serviced monthly
- Retained (deducted from the loan upfront)
Exit Strategy: Borrowers must have a clear plan to repay the loan, such as:
- Sale of property
- Refinancing with a mortgage
- Business income
- Inheritance or expected cash inflow

Types of Bridging Loans:

Regulated Bridging Loans:
- Used when the property is or will be the borrower's residence.
- Regulated by the Financial Conduct Authority (FCA).
Unregulated Bridging Loans:
- For investment or commercial purposes (e.g., buy-to-let, commercial property).
- Not subject to FCA rules.
First Charge / Second Charge Loans:
- A first charge loan is secured as the primary loan against a property.
- A second charge loan is secured behind an existing mortgage.

Who Uses Bridging Finance?

Bridging finance is used by a wide range of individuals and businesses, including:

1. Property Developers and Investors

To secure properties quickly—especially at auctions where completion is required within 28 days.
To fund refurbishments or conversions before refinancing with a mortgage.
To buy, improve, and sell properties (flip strategies).

2. Homeowners and Movers

To break property chains—buying a new home before the old one sells.
To fund down payments or renovations before moving in.

3. Landlords and Portfolio Investors

To raise capital for buy-to-let investments or portfolio expansion.
To restructure portfolios or refinance quickly while arranging longer-term finance.

4. Businesses

To release equity from property for working capital, expansion, or to pay unexpected bills or taxes.
To fund commercial property purchases.

5. High-Net-Worth Individuals

To access fast liquidity without selling investments or property.
To bridge the time gap between selling assets and making new investments.

Why is Bridging Finance Popular?

Speed and Flexibility: Faster than traditional finance, often arranged in days.
Less Focus on Income/Credit: More focus on the asset (security) and exit plan than borrower credit score or income.
Customisable Terms: Tailored interest structures and repayment terms.
Expands Opportunity: Enables buyers and investors to act quickly on opportunities others might miss due to finance delays.

Conclusion:

Bridging finance is a powerful financial tool for those who need fast, short-term funding, particularly in property transactions. It offers speed, flexibility, and access to capital, but comes with higher costs and risks if not carefully managed. It is best suited to borrowers with clear exit strategies and assets to secure the loan.

If you would like to discuss this further, please call 0208 135 0901 or book a call using the button below.

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