Bridging Finance

What is a bridging loan?

Bridging loans are fast, short-term finance that’s secured against property or land with the intention of repaying the loan via a defined exit such as a sale or by refinancing onto long-term finance like a mortgage, for example.

Favoured by property developers, bridging finance is often used to quickly purchase properties that will be refurbished, converted or otherwise improved. They are best suited to light refurbishment projects; whereas heavy structural work or ground-up developments are better suited to another solution, development finance.

If you meet the following criteria then there’s a good chance there’s a funder out there for you:

Good credit history
Relevant experience
Defined exit strategy

Up to 75% loan to value

How does it work?

Similar to a mortgage, bridging finance is used to purchase or refinance a property, as a lender advances up to 75% of the purchase price or value with the remaining balance coming from equity or a cash contribution from you depending on the circumstances.

Due to the short-term nature of bridging loans, which are often outstanding for less than 12 months, the interest is charged on a monthly basis and interest rates are often advertised as such e.g. 1% per month. When calculating your costs, this should be viewed in the context of how long you expect the project to complete.

With this type of finance and there are usually two options with regards to paying the interest rate – you can service it monthly or roll it up which means it will be deducted from the initial advance and repaid at the end via a sale or refinance.

Key features:

• Funds available quickly
• First or second charge loans
• Personal guarantee required
• Terms from 1-24 months
• Loans from £25k upwards
• Loan-to-value up to 75%
• Clear exit strategy required
• Interest can be serviced or rolled up
• Interest rates from 0.75% per month
• No early repayment fees

How much does it cost?

The main fees to consider are the arrangement fee, the exit fee and the interest rate.

The arrangement fee and exit fee are a percentage of the loan value, typically 2% and 1% respectively. These fees are often deducted from the day one cash advance which is something to be aware of when calculating how much you will receive on day one.

As mentioned above, interest rates are charged on a monthly basis with rates typically starting from 0.75% per month. This can either be serviced monthly or rolled up and deducted from the initial advance and repaid at the end via a sale or refinance. If servicing the loan, you may be asked to demonstrate how you plan to do so.

There are likely to be other associated costs to take into account like legal fees and valuation fees.

What are the benefits?

The main advantage of bridging finance is the speed in which it can be arranged. From start to finish, it’s possible to complete in 7-10 days if all parties are working together. For this reason, it’s often used to purchase properties found at auction where a quick completion is required. Alternatively, it’s used in scenarios where the property or land is already owned and funds are required quickly.

Bridging loan companies dominate the property development market, as the high street banks have pulled away. Therefore they are comfortable lending against properties that are in a poor condition which banks would be unwilling to provide a mortgage on.

Although there is a small exit fee, there are no early repayment fees which means you can repay the loan as soon as you are ready. This is in contrast to a mortgage where there are high early repayment charges in the early years.

Trade Finance

Funding to pay your suppliers for stock or release cash that’s tied up in stock you already own

Invoice Finance

Boost your cash flow by releasing the cash that’s tied up in your outstanding invoices

Business Loans

Loans can be used for a variety of reasons and the funds can be in your bank account in hours

Fast and flexible property finance that can be arranged in a matter of days

Commercial Mortgages

From purchasing your trading premises to refinancing your investment portfolio, commercial mortgages are used by SMEs and property investors alike

Development Finance

Designed for experienced developers, this funding provides the backing to purchase land and build new properties

Find the right funding solution for your business today

Ping Finance can help you secure bridging finance with a lender that is suited to you and your business. To find out how we can help you, please fill out the quick enquiry form by clicking “Let’s Talk” or alternatively, you can contact us on 0330 058 2330. Our offices are based in Bolton, Greater Manchester.

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Ping Finance is a trading name of Ping Finance Limited which is registered in England and Wales under Company Number is 10973327, whose registered address is Ground Floor, Unit B Lostock Office Park, Lynstock Way, Lostock, Bolton, England, BL6 4SG. Ping Finance Limited is also registered with the Information Commissioner under Registration Number ZA447449.