Commercial Bridging Loans – The Key Facts

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As the name suggests, a commercial bridging loan is a short-term loan secured against a commercial property.

Quick to secure, commercial bridging loans can be an attractive option for those looking to secure a commercial property, carry out light works to an existing business premises, or refinance an existing commercial property.  They can also be used to release equity from an existing commercial property for a business purpose.

The range of properties for which they can be used is varied and includes retail spaces, professional offices and residential developments. 

With the number of businesses looking for commercial property bridging loans on the rise, we’ve captured some of the most frequently asked questions and answers to follow:

What are the Benefits of a Commercial Bridging Loan?

Commercial bridging finance can be secured quickly and in as little as 10 days.  This is particularly valuable to Borrowers working to a tight deadline or looking to bridge a finance gap whilst securing a long-term finance solution.

Business property bridging loans also present far greater flex than those of a mainstream bank, which apply strict lending criteria.  Providing that the deal makes commercial sense to the specialist finance lender, a commercial or business property bridging loan can be used for a wide number of business purposes.  

Borrowers with an adverse credit history are also more likely to be considered when applying for a commercial bridging loan where exit is sale. 

Who is Eligible?

Commercial bridging loans are available to individuals and companies, including foreign nationals.  As outlined above, one of the key benefits of business property bridging finance is that all Borrowers are considered, including those with an adverse credit history.

How Do You Secure a Commercial Loan?

Before applying for a commercial bridging loan it is important to consider your exit strategy, the way by which you plan to repay the loan.  This is crucial to securing commercial bridging finance and, most importantly, the successful completion of the commercial bridging loan.

The information required to apply for a loan will vary by lender and is dependent on the Borrower’s individual circumstances.  Example documentation is however likely to include:

  • Details of the security property including the full address, value of the property, purchase price, or, if a refinance, the outstanding balance.
  • Confirmation as to the status of the security property and the income of the property, if tenanted.
  • Confirmation of the name in which the property is to be purchased/refinanced. 
  • Clearly presented plans as to how funds will be used, including key project timings. 
  • Statements of asset and liability.
  • A clear exit strategy.

How Much Can I Borrow?

The amount you can borrow will vary by lender.  Lenders typically offer commercial bridging loans of between £75,000 to £1,000,000.

What Are the Repayment Terms?

As with the loan value, the repayment terms will differ by lender, with borrower’s advised to do their research.  Whilst a low interest rate can appear attractive it is not always the best option overall.  In a volatile market which sees an increasing number of potential challenges from delays in building work to increasing material costs, Borrowers are advised to consider the lenders’ experience, funding line, and processes for managing the loan, to ensure the best chance of success and avoid potential penalty charges.  12-month repayment terms are common although longer terms can be enjoyed.

Why Do Commercial Bridging Loans Carry Higher Interest Rates than Other Loans?

Bridging loans often feature higher interest rates than mainstream finance due to the short-term nature of the loan.  They also see a greater risk to the lender.  As commercial properties typically take longer to sell than residential properties, the risk to the lender is greater and thus interest charges are higher. 

Can I Exit the Loan Early?

A reputable lender such as Mint Property Finance will work with the Borrower to structure a loan to succeed.  In most instances early repayment charges do not apply.  As terms do vary by lender however, a Borrower is advised to seek clarity of this ahead of entering an agreement.

How Do I Find Out More?

To find out more about commercial bridging loans contact our team on 0161 258 8683 or fill in our easy application form here: 

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