Commercial bridging loans, as their name implies, are quite simply bridging loans that are secured against commercial property. In common with other types of bridging they are used to obtain funds quickly, either to purchase a property or to release funds quickly from a property the borrower already owns. Typical commercial properties are office buildings, shops or factory units.
To qualify for a commercial bridging loan the property used as security will need to be at least 40% commercial. So for example, if the property is a shop with a flat above, the commercial part of the property would have to represent more than 40% of the total property. In an example such as this lenders would also normally insist on the flat having separate access from the shop and it will probably be referred to as a semi-commercial bridging loan by the lender.
Commercial bridging loans are a great option for property investors and private landlords. They can be used to acquire a property whereupon the investor/landlord will usually refurbish or renovate in order to bring the property to the required standard for renting. This will obviously enhance the value and once work is completed the property can either be sold or let. An improved property with an enhanced value and tenants that have been in place and paying rent for 6-9 months becomes a very attractive proposition for a lender offering Buy to Let mortgages. The Buy to Let Mortgage, once obtained, will be used to redeem the bridging loan.
As well as being used to acquire residential investment properties commercial bridging loans can just as easily be used to provide the financing needed to purchase a commercial unit. Once again it’s very common for the unit to be refurbished or more comprehensively renovated prior to either a sale or letting. If the property is sold the bridging loan will be redeemed from the sale proceeds and if it’s let then a long-term commercial mortgage will usually be obtained to redeem the bridge loan.
So when would a commercial bridging loan be a good option?
• Buying a commercial property
• Buying a semi-commercial property
• Buying a property at auction
• Buying a new business
• Buying brownfield sites before planning is approved
• Refinancing an existing commercial property to take advantage of a time limited opportunity
• Refinancing an existing commercial property to provide a cash injection into a business
• Refinancing an existing commercial property to resolve a creditor issue the business has
• In chain break scenarios which happen to both commercial and residential property chains
Of course there are a multitude of other uses but the common appeal of commercial bridging loans is the speed at which they can be arranged. Traditional high street lenders can take weeks or even months to review a commercial property loan application loan. Specialist bridging lenders can deliver finance in days, although it’s important to remember this is reflected in the price.
Bridging loan rates are higher than longer term interest rates and commercial bridging loans usually a little more expensive than residential bridging loans. Consequently it is important to have a clear exit strategy for repayment of the loan.
Commercial bridging loans are hugely versatile, fast and transparent and they can be used by individuals, limited companies, foreign nationals and off-shore companies investing in the UK. They play a key role in driving the UK economy.
Still unsure & need advice? Why not consult an expert?
Central Bridging are commercial bridging loan specialists with a great track record. They are a principal lender offering a range of loan facilities for business use from £100K to £2.5M over periods from 3 to 24 months. Their loans are secured on freehold and leasehold property across England and Wales.
Crucially you will always speak to a decision maker who will take time to understand you and your situation and unlike some of the bigger banks will then tailor a solution that best suits your needs rather than their own!
Why not give them a call on 03332 400 506 for an informal chat about your options.