Commercial Development Commercial bridging loans are taken out when there is a gap in finance which need filling quickly

Similar to a residential bridging loan, commercial bridging loans are taken out when there is a gap in finance which need filling quickly. For a commercial bridging loan to be taken out, the overall use of the property needs to be more than 40%. For example, if you were to buy a retail unit which had a flat above it, then the retail unit’s value would have to be more than 40% of the total valuation.

The primary use of a commercial bridging loan is for when a property is in need of significant renovations before it can qualify for a permanent financing option. Commercial lenders usually provide loan amounts based on the complete improved value of the property, rather than the value of the property that it currently sits at.

This way, commercial bridging finance can provide the capital that an estate investor will need to close on opportunities quickly, to complete any necessary renovations and to sell or refinance into permanent financing.

How Do Commercial Bridging Loans Work?

Commercial bridge loans work by lenders providing riskier loans for shorter periods of time. Whilst typical providers will lend based on a property’s current loan to value, commercial property loan providers will usually lend based on loan to cost or after repair value. This financing allows you to lend based on the property’s future value and not its current value.

Commercial bridging loans work best when you are trying to achieve your target real estate at a large discount, which is usually due to poor management or condition. Once you have your set target and a reasonable estimate of any necessary renovations that are needed to bring the property back up to a reasonable standard, then you are ready to apply for commercial bridge finance.

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Why Would I Need A Commercial Bridging Loan?

Commercial bridging loans can be used when buying commercial property, a new business, or a part commercial and part residential property. They can be used for almost all commercial property purchases, apart from houseboats.

Commercial loans can also be used before planning permission is given, on run-down commercial properties that are unable to get a mortgage in their current condition or for funding a new small business or startup. As long as you have a valid and in-date exit strategy, then the money can be used for a variety of other business reasons, from giving your business a working capital to covering any short-term cash issues.

Why Should I Use A Bridging Loan On Commercial Property?

If you are looking for real estate investment or for a space for a business to operate out of, then a commercial bridging loan is right for you. The most common reasons that commercial bridging loans are taken out is for the improvement or purchase of a commercial property. This means that you are able to purchase a property which is in poor condition and will need to carry upgrade and renovations.

Many property and building professionals use bridging loans as part of their property funding strategy. From professional landlords and developers to property investors, commercial property finance is a quick and easy way to quickly raise finance.

If you are looking to refurbish a property or finish a development that you have started, then a commercial property loan will help you to finish the work on time for an arranged date of sale.

If you have a short time frame to secure financing, then a commercial loan may well be a good fit for you. For example, if you are looking to buy a commercial property under auction conditions and you must complete the sale in 28 days, then getting a commercial mortgage would almost be impossible. However, a commercial bridging loan would be able to fund the purchase on time.

Also, if permanent financing requires you to have a complete project in place, then a commercial loan can be used to secure a finance opportunity whilst you finish working out the finer details.

If you have a traditionally unmortgageable property or area of land, a commercial loan can be used to cover your finance until you qualify or get approved for a traditional finance agreement.

What Other Ways Can A Commercial Bridging Loan Be Used?

Whilst renovating and purchasing commercial properties are the most popular uses for a commercial loan, there are other situations where they can be useful.

As commercial bridging finance loans are typically asset-based, then you may be able to use the loan to purchase property when you have a less than ideal credit profile. A commercial bridging loan will allow you to get temporary financing which will last long enough for you to be able to resolve any other credit issues to be able to secure permanent financing at a later date.

Is A Commercial Bridging Loan Right For Me?

If you’re looking for quick financial help for your commercial property and have a reasonable estimate of work that needs carrying out on the property, then you can apply for a commercial bridging loan. If you would like some more information on commercial bridging loans, or on any other bridging loan that we offer, then fill in our quick enquiry form for a free quote. We aim to get back to you within 24 hours.