27th February 2024
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Business Bridging Loans
Seeking a business bridging loan for acquisition, expansion, or debt refinancing? Mortgage Lane connects you with optimal lenders for cost-effective solutions. Our expertise ensures a smooth journey, whether you’re growing your business or managing financial shifts.
PROCESS BREAKDOWN
1
Information gathering and advic
The first process in your Business bridging loan application will be gathering or updating information in relation to the property, tenants, or yourself. Once this has been established your expert bridging loan broker will make a product recommendation.
2
Credit approval
Once you are satisfied with the product recommended and have confirmed to proceed, this will usually be submitted the same day to give you a decision, until this point there is still nothing to pay! As long as the Agreement in Principle (AIP) was approved, we can move to application stage where fees become payable.
3
Application, valuation & underwrite
Once the application is submitted, your valuation will be booked in and most of the time (depending on the lender). This will usually completed once your initial underwriting has been completed. Once the valuation is returned, if acceptable, the lender would then look to make a formal offer. You can then move to legal stage.
4
Offer and completio
Once you have had your bridging loan offer, you will require adequate legal advice and then once you’re happy, your solicitor can draw this down once the legal requirements are satisfied. Your broker at Mortgage Lane will always be checking in on the application post offer, so we are chasing for you too!
Types of Business Bridging Loans
Purchasing New Premises
We assist business owners or first time investors with bridging finance options for acquisitions, mergers, stock purchase, new premises and loan consolidation. Below we explain all of the types of bridging purposes we see for our business customers.
At Mortgage Lane, we specialise in facilitating business bridging loans for the acquisition of new business premises. Understanding the need for speed and efficiency in today’s dynamic business environment, we connect you with lenders who provide fast and effective lending options.
Swift Acquisition of Business Premises with Bridging Finance
Rapid Completion for Urgent Purchases: Bridging finance stands out for its speed, with the potential to complete transactions in as little as 4 days. This makes it an excellent option for businesses looking to purchase at auction or those needing to act quickly in the competitive property market.
Ideal for Auction Buys and Fast Transactions: The agility of bridging loans is particularly beneficial for auction purchases, where time constraints are significant. It also suits businesses aiming to capitalise on unique opportunities that require swift action.
Streamlined Application Process
Efficient Procedures with Fewer Requirements: Unlike traditional mortgages, the application process for a business bridging loan can be more streamlined. Many lenders do not require extensive searches and often accept an indemnity policy instead, leading to a quicker and less cumbersome process.
Indemnity Policy Advantage: The acceptance of indemnity policies by lenders significantly accelerates the transaction process, making it a preferred choice over lengthy legal searches that are typical in mortgage applications.
Flexibility and Convenience of Business Bridging Loans
No Exit Fees for Greater Flexibility: A key advantage of business bridging loans is the absence of exit fees. This feature adds considerable flexibility, allowing businesses to repay the loan without incurring additional costs when they are ready or have secured long-term financing.
Mortgage Lane: Your Partner in Business Growth
Connecting You with the Right Lenders: Our role at Mortgage Lane is to connect your business with the most suitable lenders, ensuring that your journey to acquiring new premises is smooth, efficient, and tailored to your needs.
Expert Guidance and Support: We provide expert advice and support throughout the process, ensuring you understand all aspects of your bridging loan and how it can best serve your business objectives.
With Mortgage Lane, purchasing new business premises is streamlined and efficient, thanks to our expertise in business bridging loans. Whether you’re buying at auction or seeking a rapid purchase, our solutions are designed to match your business’s pace and ambition.
Debt Consolidation
Business bridging loans serve as a strategic solution for debt consolidation, offering a pathway to streamline finances, including the repayment of tax bills. At Mortgage Lane, we specialise in this versatile financial tool, ideal for businesses seeking to manage multiple debts or address pressing tax obligations.
Consolidating Debts with Business Bridging Loans
Unsecured Borrowing Consolidation: Businesses with extensive unsecured borrowing can benefit significantly from consolidating these debts into a single bridging loan. This consolidation is secured against a business asset, potentially lowering interest rates and simplifying repayment processes.
Lowering Interest Rates: By using an asset as collateral, some businesses may secure lower interest rates compared to unsecured debts depending on the business type and length of trading. This shift can lead to substantial savings and a more structured approach to debt management.
Addressing Tax Obligations
Repaying Tax Bills: Business bridging loans can also be effectively utilised to settle tax liabilities. This option provides a timely solution for businesses facing sizable tax bills, ensuring compliance while maintaining operational stability.
Tailoring to Various Business Scenarios
Versatility for Different Business Types: Whether your business is newly established or has a long trading history, our bridging loan solutions are adaptable to a range of business scenarios, including debt restructuring and tax repayment.
Mortgage Lane’s Customised Financial Guidance
At Mortgage Lane, we’re dedicated to finding the right debt consolidation and tax repayment solutions for your business. Our approach is centred on understanding your unique financial circumstances and offering bespoke bridging loan options.
Expert Advice for Financial Optimisation: Our team provides expert advice, guiding you through the process of leveraging bridging loans for both debt consolidation and tax liabilities, ensuring that your business achieves optimal financial health.
Efficient Debt Management and Tax Repayment: Partner with Mortgage Lane for a streamlined solution to manage your business debts and tax bills, enhancing your financial strategy and operational efficiency.
Business Acquisition or Mergers
Are you considering a business acquisition, whether as an experienced investor or a first-timer? At Mortgage Lane, we specialise in business bridging loans, a strategic financing option that differs from traditional business loans by being secured against property and charging interest monthly, not annually.
Understanding Business Bridging Loans for Acquisitions
Secured and Flexible Financing: Unlike typical business loans, a business bridging loan is secured against a property. This security allows for more flexibility and often a faster release of funds, making it an ideal choice for quick acquisitions.
Monthly Interest Charges: Bridging loans charge interest monthly. This structure can be more manageable and predictable for businesses, allowing better cash flow planning compared to annual interest charges.
Using Business Bridging Loans for Mergers and Acquisitions
Facilitating Mergers with Bridging Finance: In a merger, where two companies combine to form one entity, business bridging loans can be instrumental. They offer a way to leverage assets owned by either the acquiring company or the company being acquired, providing a capital boost for the merger process.
Definition of a Merger: A merger involves the combination of two businesses, resulting in a single, unified company. This strategic move can expand market reach, diversify products, or enhance competitiveness.
Business Acquisitions Explained: A business acquisition occurs when one company purchases and assumes control of another. This can be an effective strategy for growth, market expansion, or gaining new technologies or expertise.
Asset-Based Funding for Expansion and Acquisition: Whether it’s for a merger or acquisition, business bridging loans can tap into the value of business assets, providing necessary capital for these strategic moves.
Mortgage Lane: Your Partner in Business Bridging Finance
At Mortgage Lane, we understand the intricacies of business bridging loans for acquisitions and mergers. We guide you through the process, ensuring you have the right financial tools to achieve your expansion or acquisition goals. Whether you’re a seasoned investor or venturing into your first acquisition, our expertise in business bridging loans will pave the way for your success.
Experts in Business Bridging Loans
At Mortgage Lane we are specialists in business bridging loans. Our expert brokers are regular advisors with bridging loans to facilitate business needs, securing against property, often this can offer businesses greater flexibility with affordability and speed. We assist businesses with bridging finance for a variety of reason such as the below.Specialist scenarios:
- Mergers and acquisitions
- Property purchases
- Tax bills
- Loan consolidation
- Trading capital
- VAT bridging
TRY OUR Bridging Loan CALCULATOR for Businesses
ANSWERS TO COMMON QUESTIONS AND QUERIES ABOUT BUSINESS BRIDGING LOANS
What is an business bridging loan?
A business bridging loan is an ideal solution for meeting the stringent deadlines often set by property auctions. Commonly, auctions require completion within 28 days, and failure to meet this deadline could result in the loss of your deposit and additional costs. In some modern auctions, you may be given up to 56 days to complete. Depending on your situation’s complexity, Mortgage Lane may recommend a mortgage, but more often, a bridging loan is the more suitable option for these time-sensitive scenarios.
Key Features of Business Bridging Loans for Auctions
Short-Term Finance Solution: Bridging loans are short-term financial solutions with terms typically ranging from 3 to 36 months. They are designed with the intent to be exited within this timeframe.
Common Exit Strategies: The exit from a bridging loan usually involves the sale of the property (the security), a remortgage, or, in some instances, transitioning to another bridging loan.
Adaptability for Various Property Conditions: Business bridging loans are particularly adept at lending against properties that may not qualify for traditional mortgages. This includes properties that are uninhabitable or require significant renovation. They can also serve as a strategic tool for businesses looking to build their portfolio and enhance their mortgage eligibility through property improvements.
Mortgage Lane’s Role in Facilitating Business Bridging Loans for Auctions
At Mortgage Lane, we understand the unique challenges and opportunities presented by auction purchases. Our expertise in business bridging loans makes us well-equipped to advise and support you in securing the necessary financing quickly and efficiently. Whether you are dealing with a tight auction deadline, working with a property that requires substantial work, or looking to grow your business portfolio, our tailored bridging loan solutions are designed to align with your specific business objectives.
What is the minimum property value required for a business bridging loan?
When securing a business bridging loan for auction property purchases, it’s essential to understand that there isn’t a uniform minimum property value across all lenders. In the market, lenders’ criteria can vary, with many setting a minimum property value, often around £75,000, as part of their risk assessment.
Variability in Business Bridging Loan Terms for Auctions
Diverse Lender Criteria: In the business bridging loan sector for auction properties, lenders have different requirements, including varying minimum property values for loan eligibility.
Market Standards in Loan Offerings: Leading lenders typically establish a baseline property value, commonly starting at about £75,000, to determine the feasibility and viability of the loan for auction properties.
Expedited Process with Business Bridging Loans
Circumventing Traditional Local Searches: For auction property purchases, the usual requirement for local searches, which can be lengthy, is often bypassed. Most lenders in this space are open to accepting an indemnity policy instead.
Benefits of an Indemnity Policy: Using an indemnity policy, a form of insurance against issues usually uncovered in local searches, can significantly speed up the transaction process. This is particularly beneficial for auction purchases where timing is crucial.
Mortgage Lane’s Expertise in Business Bridging Loans for Auctions
Specialised Guidance and Solutions: As specialists in business bridging loans for auction properties, Mortgage Lane provides expert advice on navigating lender requirements and the use of indemnity policies to expedite transactions.
Streamlined Auction Loan Experience: Our goal is to connect you with lenders who offer the flexibility of indemnity policies, ensuring a faster and smoother purchase process at auctions.
Conclusion
Understanding the intricacies of business bridging loans for auction properties, including lender-specific property value thresholds and the option to use indemnity policies, is key. With Mortgage Lane, you can confidently navigate these aspects, securing a business bridging loan that aligns with your auction purchase goals and timelines.
How do I get an business bridging loan with bad credit?
Navigating Business Bridging Loans with Adverse Credit
In the business bridging loan market, similar to mortgages, there are lenders who accommodate applicants with adverse credit histories. At Mortgage Lane, we understand that financial challenges like missed payments, CCJs, defaults, or even IVAs can be part of a business’s journey. We are committed to sourcing suitable business bridging loan options for you, regardless of these credit challenges.
Business Bridging Loans for Applicants with Adverse Credit
Wide Range of Lender Options: Our network includes lenders who consider applications from businesses with diverse credit histories. This means that even if your credit profile includes adverse elements, we can help you find a financing solution that meets your needs.
Improving Options Post-Bankruptcy: If your business has been discharged from bankruptcy, the availability of business bridging loan options typically improves over time. Generally, the prospects become more favourable after 3 years and continue to improve after 6 years.
Refinancing Considerations for Businesses with Adverse Credit
Exploring Remortgage Options: For businesses seeking a bridging loan for refurbishment projects, lenders may inquire about your potential for remortgaging. This consideration is especially relevant for applicants with adverse credit, as it forms a crucial part of their assessment of your exit strategy from the bridging loan.
Mortgage Lane’s Expertise in Adverse Credit Scenarios
At Mortgage Lane, we specialise in assisting businesses with adverse credit to secure bridging loans. Our expertise lies in understanding your unique financial circumstances and guiding you towards lenders who can provide viable and supportive financial solutions. We help you navigate the complexities of obtaining a business bridging loan, ensuring your financial strategy aligns with your business goals and refurbishment plans.
Can first time buyers get an business bridging Loan?
In the world of business bridging loans, it’s important to note that lenders do not require applicants to be homeowners. This flexibility makes bridging loans a viable financial tool for a wide range of business scenarios, including those involving property purchases.
Strategy for First-Time Buyers and Auction Purchases
Using Bridging Loans for Initial Purchases: Applicants who initially use a bridging loan for auction purchases might do this for speed or criteria reasons and may later choose to remortgage the property later.
Mortgage Lane’s Expertise in Business Bridging Loans
At Mortgage Lane, we understand the strategic use of business bridging loans in various investment scenarios. Our expertise in bridging loans can help you navigate the financial landscape effectively. We guide our clients through the intricacies of bridging finance, ensuring that you find the right solution to meet your business objectives and investment goals.
Is a business bridging loan used to buy at auction?
Yes, business bridging loans are frequently used by our clients to acquire properties at auction. When considering a business bridging loan for this purpose, it’s advisable to engage with your broker promptly. This early engagement is crucial for determining the legal representation you’ll be working with during the transaction.
Navigating Legal Representation in Business Bridging Loans
When obtaining a business bridging loan for auction purchases, it’s important to be aware that most short-term lenders operate with a closed legal panel. This means that the solicitor you initially choose might not be eligible to act on behalf of your loan due to the lender’s specific panel requirements.
Mortgage Lane’s Guidance in Selecting Legal Representation
At Mortgage Lane, we emphasise the importance of understanding the legal aspects of business bridging loans, especially for auction purchases. Our expertise lies in guiding you through the process of selecting an appropriate solicitor who aligns with the lender’s requirements. Early consultation with our team ensures that you are well-prepared and informed about the legal considerations involved in your business bridging loan for auction properties.
Where do you broker business bridging loans in the UK?
We assist our clients with Business Bridging loans in England, Wales, Scotland and Northen Ireland.
Can you apply for a business bridging loan before the auction?
Yes.
In fact, as long as you are happy to risk the application fees it can be a great idea to speed up your application and buy yourself time before you are up against the clock! However, if you do not win the property, this can mean wasting fees on broker fees, valuation fees and sometimes legal costs.
How long does a business bridging loan take to complete?
We are proud to share that at Mortgage Lane, we have successfully arranged a business bridging loan for an auction purchase in a record time of just 4 days. Achieving such rapid completion is often driven by the strength and clarity of the exit strategy.
Key Factors for Fast Completion in Business Bridging Loans
Strength of Exit Strategy: The key to a swift business bridging loan process is a well-defined exit plan. This could be
Sale: The deal’s profitability and market demand, evaluated by a valuer, play a crucial role.
Remortgage: If remortgaging is the chosen exit, the underwriting process is more comprehensive, including reviews of credit status, income, experience, stress testing, and an asset and liability assessment.
Accelerating the Legal Process in Business Bridging Loans
Importance of Efficient Legal Procedures: The legal aspect significantly influences the speed of arranging a business bridging loan for auction purchases.
Indemnity Policy vs. Legal Searches: Choosing a lender that accepts an indemnity policy instead of requiring full legal searches can drastically reduce the time needed to arrange the loan. Traditional legal searches can take up to 6 weeks with some councils, which may not be feasible for auction purchases with a 28-day completion deadline.
Mortgage Lane’s Role in Facilitating Quick Business Bridging Loans
At Mortgage Lane, we understand the urgency often required in auction purchases. We guide our clients to lenders who can expedite the process, bypassing lengthy legal searches in favor of indemnity policies where appropriate. This approach ensures that your business bridging loan aligns with the rapid pace of auction timelines and meets your strategic objectives.
Can I finance the VAT with a business bridging loan?
Yes, alongside a business bridging loan, VAT bridging can be an essential financial tool, especially when purchasing commercial buildings registered for VAT. At Mortgage Lane, we specialise in both business bridging loans and VAT bridging loans to cater to the comprehensive needs of our clients.
Business Bridging Loans and VAT Considerations
VAT Bridging in Addition to Business Bridging Loans: When acquiring commercial properties elected for VAT, a business bridging loan can provide the primary financing, while a VAT bridging loan covers the VAT element. This dual approach is often necessary as some commercial buildings’ purchase prices include VAT.
Why VAT Bridging is Important: The need for a VAT bridging loan arises because reclaiming VAT from HMRC can take time, and immediate funding is required to cover this cost upfront. A business bridging loan combined with a VAT bridging loan ensures seamless financing of the entire purchase amount, including VAT.
Mortgage Lane’s Expertise in Business Bridging and VAT Financing
Comprehensive Financial Solutions: We at Mortgage Lane offer tailored solutions that combine business bridging loans with VAT bridging loans. This approach is particularly beneficial for business owners expanding their operations, which might involve financing VAT on new premises, including retail units, Semi-commercial properties, light industrial sites, hotels, and B&Bs.
Specialised Guidance in Business Bridging Loans: Our expertise in business bridging loans extends to helping clients understand how to strategically use these loans alongside VAT bridging to finance their property purchases effectively.
Streamlining Your Business Bridging Loan Journey
Facilitating Dual Loan Processes: We guide you through the complexities of managing both a business bridging loan and a VAT bridging loan, ensuring that you have the necessary funds in place for a successful property acquisition.
Addressing Various Property Types: Whether it’s for purchasing new freehold commercial properties or converting existing ones to residential use, our business bridging loan solutions are designed to cater to your specific financial needs.
For more detailed information on how VAT bridging loans can complement your business bridging loan, especially for VAT-registered commercial property purchases, visit Mortgage Lane’s dedicated page on VAT bridging.
What is the minimum loan size required for a business bridging loan?
In the business bridging loan market, especially for auction purchases, it’s important to note that there’s generally no universal minimum loan size. However, the criteria, including loan sizes, can vary significantly among lenders, which is an essential consideration for businesses looking to finance auction acquisitions.
Understanding the Variability in Business Bridging Loan Sizes
Diverse Lender Criteria: The business bridging loan sector is characterised by a variety of terms set by different lenders. This includes noticeable differences in minimum loan sizes, reflecting the diverse approaches and risk assessments of lenders in this niche.
Common Loan Size Thresholds: While there’s no standardised minimum across the board, many leading lenders in the business bridging loan market start their loan offerings at around £50,000. This figure often represents a strategic threshold in their lending criteria for auction purchases.
Mortgage Lane’s Expertise in Business Bridging Loans for Auctions
Navigating Loan Size Requirements: At Mortgage Lane, we specialise in business bridging loans for auction purchases, offering expert guidance to navigate through the varying requirements set by different lenders, including understanding the nuances of loan sizes.
Tailored Financial Solutions for Auction Purchases: We are committed to helping you find the most suitable business bridging loan for your auction acquisition needs. Our focus is on connecting you with loan options that align with your financial situation and your strategic investment goals, considering the diverse loan size thresholds in the market.
Conclusion
While the business bridging loan market doesn’t have a one-size-fits-all minimum loan size, understanding the different thresholds set by various lenders is crucial for making informed decisions. Mortgage Lane stands ready to assist you in exploring these options, ensuring you secure a business bridging loan that meets your specific requirements for auction purchases and investment strategies.
How is interest paid on a business bridging loan?
Business bridging loans offer two main types of interest arrangements – Serviced Interest and Deducted (Retained) Interest – each with its specific benefits and considerations. Understanding these can help businesses choose the best option based on their financial situation and strategy.
Serviced Interest in Business Bridging Loans
Definition: Serviced Interest requires the borrower to pay the interest monthly. This setup is similar to a standard mortgage and is common in business bridging loans.
Advantages: This option is advantageous for businesses with a regular income stream. It allows for effective cash flow management by paying interest incrementally, helping to maintain the principal loan amount as the borrower actively pays off the interest.
Considerations: Businesses must ensure they have sufficient cash flow to manage these monthly payments. Careful financial planning is essential to avoid any strain from these ongoing expenses.
Deducted (Retained) Interest in Business Bridging Loans
Definition: In a Deducted or Retained Interest arrangement, the total interest for the loan term is calculated upfront and deducted from the initial loan amount.
Advantages: This option suits businesses that may not have a consistent income during the loan term, such as those waiting to sell or refinance a project. It simplifies financial management by eliminating the need for monthly interest payments, as the interest is prepaid
Considerations: With the interest deducted at the start, the initial capital available to the business is reduced. This requires careful planning to ensure that the business has enough funds to meet its immediate needs.
Choosing the Right Interest Option for Your Business
Both Serviced and Deducted Interest options in business bridging loans have distinct uses, depending on the financial circumstances and objectives of the business. It’s crucial for borrowers to understand these differences to select an arrangement that aligns with their financial strategy and the specific use of the bridging loan.
What is a closed legal panel?
When it comes to business bridging loans for auction purchases, specialist lenders often operate with a closed legal panel. This means they specify a select group of solicitors authorised to represent them. As a borrower, you would choose from this panel of solicitors, who may represent both the lender and potentially your interests as well.
Understanding Legal Representation in Business Bridging Loans
Joint Representation Option: Some lenders offer joint representation, allowing a solicitor from their closed panel to act on behalf of both the lender and you. This can streamline the legal process and might be more cost-effective.
Sole Representation and Borrower’s Choice: In cases where the lender’s panel solicitor represents only the lender (sole representation), you have the option to engage your own solicitor for your representation, subject to certain conditions and eligibility.
Key Considerations for Legal Representation
Managing Legal Costs: An important aspect to consider in sole representation scenarios is the presence of two sets of legal fees – one for your solicitor and another for the lender’s solicitor. This can significantly impact the overall cost of securing a business bridging loan.
Mortgage Lane’s Guidance in Legal Representation for Bridging Loans
At Mortgage Lane, we understand the intricacies of legal representation in business bridging loans for auction purchases. We guide our clients through the process, helping you understand the implications of joint versus sole representation and assisting in selecting the most appropriate and cost-effective legal support for your loan.
Do I need a minimum income for an business bridging Loan?
When considering a business bridging loan, especially for auction purposes, it’s essential to have a well-defined exit strategy. A common exit plan for a business bridging loan is transitioning to a traditional mortgage. In such cases, lenders of the business bridging loan will closely review your income to ensure you have the financial stability to successfully move onto a mortgage.
Income Verification for Mortgage Exits in Business Bridging Loans
Importance of Income in Business Bridging Loan Exit Strategies: If you intend to use remortgaging as your exit strategy from a business bridging loan, lenders will scrutinise your income. This is to confirm that your business can comfortably handle the transition from the business bridging loan to a more traditional mortgage arrangement.
Mortgage Lane’s Expertise with Business Bridging Loans: At Mortgage Lane, we specialise in business bridging loans and understand the importance of aligning your loan with a feasible exit strategy. We guide our clients through the process of obtaining a business bridging loan, ensuring that every aspect, including the transition to mortgage financing, is carefully planned and executed.
Streamlining Your Business Bridging Loan Journey
Facilitating Successful Loan Transitions: Our expertise in business bridging loans extends to helping you prepare for lender income evaluations, crucial for a seamless transition from your business bridging loan to a mortgage. We focus on ensuring that your business bridging loan not only addresses your immediate financial needs but also sets you up for successful long-term financing solutions.
What entities can take out a business bridging loan
We arrange cost-effective Business bridging loans for:
- Individuals
- Special Purchase Vehicles/Limited Companies
- Limited Liability Partnerships (LLP)
- Trading companies
- Charities
- On/Offshore Trusts
How do you repay interest on a business bridging loan?
With an Business Bridging loan being short term, unlike a mortgage, your auction lender will charge interest monthly rather than annually.
If you are eligible you may be able to repay the interest monthly. But if not your interest may be deducted from the day one loan.
When the interest is deducted from the loan, if you exit the auction loan early then you will get a refund for unused interest.
Is experience required for a business bridging loan?
Although some lenders will be more comfortable with experience, most Business Bridging loan Lenders would not require you to have any level of experience when arranging a bridging loan. The experience required at underwriting by the bridging lender, will be the experience you will need to get a development loan in order to exit the Business Bridging loan or experience required to remortgage.
Are business bridging loans regulated?
It is important to note that Business Bridging Loans are not covered by the Financial Services Compensation Scheme, unless they intend to reside in the property, so auction loan investment borrowers should ensure they are dealing with a reputable lender.
Learn more about Business Bridging Loans
At Mortgage Lane, we see the most complex of Business Bridging Loan applications, some of which make a good read for investors looking to learn from other applicants’ challenges, or for those effected by the topics! See more refurbishment loan topics covered in our blog here.
START YOUR JOURNEY WITH AN EXPERT Business Bridging Loan BROKER
Let us know about your enquiry and one of the team at Mortgage Lane will be in contact to assist!