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Bridging Finance
Bridging finance has increased year on year and in today’s market is one of the most flexible types of finance you can find. Bridging by nature is short-term and has a typical term length of 12-24 months, albeit you can get as short as a 3-month term. You can achieve up to 85% loan-to-value, depending on the borrowing requirements.
The process of application to completion can be done as quickly as 10 working days and typically takes between 4 - 6 weeks. Meaning that investors are able to get access to funds quickly.
These come in a range of product types and we will cover these in more detail below.
Residential Bridging
Most lenders will typically lend you up to 75% of the properties current value, before deducting fees and interest from that gross total. We do have access to some who can deliver up to 85% of the current value (See refurbishment for further detail on this).
If you have multiple properties, you can leverage across existing stock to raise 100% of the new property value! Lenders advertise with cheap rates and high LTVs but the reality is that the higher the LTV the higher the rate, always speak with us about identifying the best rates in the market. Bridging loans can be serviced, retained or rolled when it comes to the interest (check out our jargon buster for detailed explanation of each type).
There are a number of reasons why utilising a bridging loan can be beneficial, including:
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Purchasing a property at auction (further detail below).
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Capital raising on an existing property or portfolio. Within the realms of bridging, many property owners will take advantage of their stock by raising capital on unencumbered properties, raising funds to purchase new properties or fund other projects. This type of capital raising can be done for any legal purpose.
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Purchasing land (Further detail about this below).
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Purchasing an uninhabitable property. This is a term used for a property that doesn’t have a kitchen or bathroom (typically some or all serviced aren’t up and running), may also be an abandoned property that has been vandalised. A bridging loan will enable you to buy the property and decide on whether to renovate or seek full planning permission (further information within our Refurbishment section).
Bridging finance can enable many closed doors to be opened, and profit to be realised! If you want to explore these types of opportunities, speak to a member of our BBA Finance team.
Development Exit finance is used to settle any remaining loans on developments that are nearing completion or have completed. It proves invaluable in managing the challenges posed by sales deadlines, limiting expenses, and freeing up additional capital well ahead
of time.
This type of loan is typically short-term on a 6-12month basis and is utilised for a variety of reasons, such as:
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Releasing capital to finish off items such as landscaping/driveways
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Ensuring you have money available to secure the next opportunity
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Clear the existing development loan if the extension fees are not favourable vs a bridging set up fee
The growth of this lending space has mainly been driven through a lack of support for first time buyers which impacts chains and those looking to scale up, delays with land registry/local authority for updating records/clearing conditions prior to occupancy and generally the sales process reaching record lengths of time! The team at BBA Finance can help you navigate this area, so if you are approaching your maturity date of your loan, speak with our team.
Development Exit
Land Bridging Loan
A Land Bridging Loan is a short-term loan secured against a piece of land, which typically will not have any buildings/structures standing on it. The land could have previously been used for agriculture, storage, garages, equestrian use or it could even be “scrub” land with development potential. Regardless of what the past or current use is/was, everything has value.
Such loans are typically used by property investors and property developers to purchase land. The plan could be to obtain detailed planning consent to include a change of use or amend existing planning to enhance it to make it more favourable to then sell the land or move on to development finance and build out the project.
Commercial bridging loans are, as their name suggests, bridging loans which are secured against commercial property. They are used to secure funds quickly to fund commercial property purchases or release funds from a commercial property.
They are used when funding is needed to secure a commercial property, often in situations where a commercial mortgage wouldn’t be appropriate. This is usually either related to how quickly the funds are needed, or because a commercial mortgage wouldn’t be available in current circumstances.
Asset Types:
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Offices, professional practices
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Pubs, bars and restaurants
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Hotels, guest houses and B&Bs
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Retail units and business parks
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Warehouses, factories and industrial units
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Large HMOs/unusual residential investments
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Mixed use property
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Care homes
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Places of worship
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Premise of a trading business
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Holiday home parks
Commercial & Semi Commercial Property
Auction Finance
An auction purchase will typically have a 28-day completion timescale built in, with penalties if you exceed that time period. However, many modern auction houses utilise a 56day completion timescale. Many auctions are now done via an online and give decent lead times, enabling a proper review to be carried out.
Properties at auction can be problematic if you haven’t fully vetted the property you intend to buy or get carried away with a bidding war and end up over paying! There is no certainty of finance without due diligence and a valuation taking place, so always check before committing to the purchase.
We have supported many clients successfully through the auction process, helping them understand the additional fees involved and ensuring their capital stack is adequate from outset. Speak with us to gain better knowledge within this process.