Bridging loans for business purposes

Typical uses

• Buying a business or a partner's shares where a deadline applies
• Paying a tax liability while longer-term funding is arranged
• Buying stock or equipment ahead of a contract
• Covering a cash flow gap until a known payment arrives
• Buying business premises quickly, for example at auction
• Releasing equity from commercial property while a refinance completes

What links them is a clear short-term need and a clear way to repay. If the need is long term, a term loan or commercial mortgage is usually more suitable.

Security

The loan is secured on property, which can be commercial premises, investment property or, more selectively, your home. Commercial and semi-commercial bridging cover shops, offices, industrial units and mixed-use buildings. Lenders usually lend less against specialist property, such as pubs or hotels, which are valued partly on trading.

If you would rather not disturb an existing mortgage, a second charge bridge may be an option, subject to the first lender's consent.

The exit

Lenders want to see exactly how the loan will be repaid. Common exits for business bridging include:

• A commercial mortgage or term loan, with evidence it is achievable
• The sale of a property or a business asset
• A specific payment due to the business, such as a contract payment or the proceeds of a sale
• Refinancing once the business's accounts support conventional lending

If the exit depends on business performance, lenders will review accounts and forecasts. See bridging exit strategies.

When your home is the security

Using your home to raise money for a business needs particular care, because your home is at risk if the business cannot repay. If the property is, or will be, lived in by you or a close family member, the loan is a regulated mortgage contract and comes with additional protections. We will tell you at the outset if that applies and how your case will be handled.

Your home or property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.

What to prepare

Lenders will want the property details, the purpose of the loan, evidence for the exit, recent business accounts where relevant, and details of the company and its directors. For company borrowers, expect to give personal guarantees.

You can compare indicative terms for commercial and investment security on Instant Quotes.

Bridging compared with other business funding

Bridging is one of several ways to fund a business need, and it is not always the best one. Compared with an unsecured business loan, bridging can raise larger sums and is assessed mainly on the property rather than trading history, but it puts property at risk and needs a clear exit. Compared with a commercial mortgage, bridging is quicker and more flexible, but more expensive per month.

Bridging tends to fit when the need is short term, the amount is significant, time is tight and there is property with equity to offer as security. If the need is ongoing, such as working capital for a growing business, a longer-term facility is usually more suitable, and the cost of bridging for a long period can outweigh its speed.

Whatever the route, be clear about how and when the money will be repaid before committing. Lenders will ask, and the answer decides whether bridging makes sense.

Common questions

This guide is for general information only and should not be treated as legal, tax or financial advice. Lender requirements depend on the property and your circumstances.