A commercial bridging loan is short-term finance, secured on either commercial property or development land.
A commercial bridge is utilised to secure a commercial property. Especially if the transaction needs to be done faster and where a standard commercial mortgage may not be appropriate.
A commercial bridge can be the best funding strategy when you are buying at auction, completion must take place quickly, or where refurbishment works are required. Other reasons may be to bridge the gap between one commercial being sold and another being purchased or finance required for a new business purchase.
Speed - a commercial bridge can be arranged in a matter of weeks, whereas a standard commercial mortgage can take longer to arrange.
Interest rate - generally you will find the interest rates on a commercial bridging loan is higher than a commercial mortgage.
Term - a commercial bridge loan is classified as a short-term facility (generally 3-24 months). Standard commercial mortgages range from 5-30 years.
Underwriting - a commercial bridge will have a lot less red tape around property condition and income criteria. They are more flexible in their lending approach.
Commercial bridging loans can be secured against a wide variety of businesses including:
Uk citizens individuals, Ltd company/Partnerships/LLP's, offshore companies, trusts and pension funds, Foreign nationals and Expats. Impaired credit can also be considered.
Commercial bridging loans are a specialist area of lending and in recent times have become more popular, with an increased demand from investors purchasing commercial property. Interest rates can differ between residential bridging products and commercial bridging loans. As with residential bridging the exit strategy is one of the most important factors, along with location, type of commercial asset, timescales and the lenders perceived risk of the purchase. There is no specific rate for a commercial bridge and every deal is priced individually. We have secured rates as low as 0.6% for our commercial investors, moving upwards to 1.5% per month - factors for your interest rate will depend on your client profile, the property you are buying, the exit strategy, the works required and the timescales needed to complete your bridge.
We can help you arrange commercial bridging finance from £100,000 with no upper limit.
Your loan to value will depend on type of property, but we can go up to 75% for the right property. With additional security we can even get you a 100% lending (please note commercial bridging is classed as more high risk, so lenders will always want to ensure the deal and numbers make sense and the risk is limited.)
When taking out a commercial bridging loan, the below fees will be applicable:
Lender arrangement fee – This fee is charged by the bridging lender and can be added to the gross loan amount. this fee is typically between 1-2%.
Broker fee– This is normally 1% of the loan amount, but is dependant on the deal and work involved. Normally paid in two instalments. A charge at application and balance on offer/completion.
Valuation fee – This fee is payable to a surveyor. The lender needs to have the property valued and assessed to ensure it is a suitable security. This fee is paid once your application is submitted. The cost will depend on the purchase price.
Legal fees – Generally the buyer is expected to pay both your own legal fees and the lenders legal costs. Normally a fee payable on account to the solicitor to start working and balance due on completion.
Lender exit fee – Some lenders may still charge you a fee at the exit, however we are seeing this fee being removed as the market becomes more competitive. Some lenders still do charge this if the term is short. If charged, generally they are equal to 1 month’s interest.
As with any loan the right lender will need to understand and know who your are, what you do, the type of property you are purchasing, understand why you are purchasing it, how long you need the financing for and what your exit route will be.
We always advise speaking to us in advance, giving us both an advantage to plan and ensure your finance application is correctly processed. It also allows us to plan and help you organise your finances (if need be).
We can run you through what paperwork will be required, discuss any questions you may have about obtaining a commercial bridging loan or you may just want a professional, independent opinion on the property you are buying. We can also discuss other commercial finance options.
In any instance we are here to help.
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