You may use this type of loan if your business needs to make a pressing big-ticket purchase or investment, but you don’t have the liquidity on hand to go ahead with the transaction. Businesses solve their liquidity problem by taking out a bridging loan to cover the cost of the transaction, purchase or asset they want to buy. The loan is repaid quite quickly, usually within a few months to around two years.
To repay the loan, you will either raise funds through your usual business activities, raise significant capital through another source (i.e., a buyout, acquisition, raising debt), or arrange to refinance the loan at term.Arrange a Callback
The foundations of bridging loans lie in property, but today their use in both business and residential contexts is far broader.
Business bridging loans are still commonly used to buy commercial property – this could be anything from a warehouse to an office building, retail space, hotels, leisure space or any other commercial property. Investments into these kinds of property will typically run to millions of pounds, and your business bridging loan match.
Bridging loans for businesses are not limited to purchasing a property. You can also use them to buy in something like machinery or infrastructure, pay off a debt, make an investment into something your business needs, cover a short-term cash flow issue or buy diverse assets. These loans can also be used to seize an unexpected opportunity or grow the business.
Overall, there is minimal limitation on the use of business bridging loans. Your lender will want to see a solid business case for lending, but if they see sense in your plans, you can offer good security, and your business is on solid financial ground, you are likely to get a green light.
For the right deal and the right borrower, lenders have nearly endless enthusiasm to offer high-value bridging loans: multiple seven-figure loans are not unusual at all.
How much you can borrow will depend very much on your business, what sector you are in, your financial stability, the complexity of the transaction and the risk.
At the top of the market, you will find that niche and specialist lenders will usually have more capability and enthusiasm to take on large bridging loans. Loan-to-value for a business bridging loan depends on a number of variable factors relating to the security offered.
Enness exclusively brokers high-value business bridging loans, and there is no maximum loan amount. Enness’ team has experience brokering deals of multiple tens of millions of pounds.
There is no minimum bridging loan term, so your business will be able to borrow for even as little as a couple of weeks if required. Bridging loans tend to involve very significant amounts, but the loan is very short, so you will need to consider how you will "exit" the loan at term.
If you are buying commercial property, selling your property to repay the loan could theoretically be an option. However, it’s likely you have made a long-term investment in property and will not wish to sell in just a few years, so thinking about other ways to pay off the loan will be imperative.
Astute financial planning is a must, and lenders will want to see your business has a workable strategy they can get behind. If you plan to pay off the loan, lenders will want to know how you will save the funds and assess how certain it is that your business will receive what you think it will.
Enness will be able to help you plan short, medium, and long-term strategies and financial repayment plans that keep your options open. For many businesses, refinancing is the best option, given it allows a degree of flexibility and less pressure on finances to repay a loan usually amounts to several million pounds. If you know you will want to opt for refinancing at the loan term, your broker will be able to plan options for you for further down the line if you wish.
It’ll come as no surprise that you will pay will depend vastly on how much you are borrowing and what you need a business bridging loan for. The security on offer, how you plan to exit the loan, and your profile (both personal and business) will also influence what you pay.
Finance interest rates will depend on the detail, situation and asset offered as security.
When it comes to the cost of bridging loans for businesses, you will need to think about more than just interest rates. Because this type of finance is very complex, there are several additional charges that you will need to consider.
As well as monthly or annual interest, you will also need to pay an arrangement fee to your lender at the start of the loan term. An exit fee may also be payable at the end of the loan. Both the arrangement and exit fees will either be charged as a fixed amount or as a percentage of your loan.
There will also be other costs, and it is worth thinking about your investment in these up-front. It can be tempting to try and get cheap deals on elements like legal fees, but there is always a balance to be struck. Every player in a business bridging loan transaction has a pivotal part to play, and the deal won’t go through if one party doesn’t fulfil their duties properly. There is no time for mistakes, redrafts, ‘mislaid’ paperwork or a broker/lawyer/surveyor that answers emails late or takes unexpected afternoons off in the middle of a deal. In essence, you will need every party to take the transaction seriously and give it their all. You may not incentivise the cheapest, smallest, and more inexperienced players to do this. Conversely the more established, practised, and professional players will understand what they have to deliver and the pressure you are under, and it is often worth paying for the privilege of working with firms that can really deliver on what they say they will.
Bridging loans for businesses are typically structured so that you pay the interest rate as a percentage of the loan amount, which is calculated monthly. There are three ways to pay the interest rate.
Firstly, if you pay retained interest, your interest payments are deducted from the gross loan amount and are used to meet the interest costs as they accrue, i.e., you pre-pay the interest on the loan.
For deals that use rolled-up interest, instead of paying a monthly interest payment, interest is added to the outstanding capital (calculated on a monthly basis). You will pay the total amount at the loan term.
If you are offered serviced interest, you will need to meet the interest cost monthly as you would with a ‘traditional’ loan. How you pay interest will affect the total cost of your business bridging loan. It will also impact your cash flow and influence how much lenders will let you borrow. Your broker will talk you through what kind of interest structure will work best for you and seek out your preferred option from lenders to ensure you are in the best possible position.
There are many business bridging finance providers, each seemingly offering the ‘best' deal in the market. The reality is that finding the most competitive deal via mainstream lenders is a challenge if you need a significant loan. Most lenders are best suited to working with individual customers rather than businesses, and they offer smaller loans as a reflection of this. These players are usually in the market to help homeowners buy a new property before their old home has sold.
High-value bridging loans for businesses require a specialist approach. Generally, private banks, peer-to-peer lenders, alternative lenders, and specialist bridging loan firms will offer the best finance for significant loans or complex transactions. There are other options, however. High street lenders, challenger banks and building societies all offer some form of business bridging finance, although costs and rates will be very different at each. How competitive they can be will depend on the security, risk, how much you are borrowing and what you need bridging finance for.
Lenders often specialise in distinct types of business bridging finance. Some will be happy to enter into very complex transactions; others will have no problem lending against unusual or niche assets. Others still will lend very significant amounts but will have a strong preference for straightforward deals.
Knowing which lenders to approach for a high-value loan is critical for success. You will save time, money and effort getting straight to the source of the very best finance. Applying for a bridging loan is time-consuming, and if you are operating alone, each lender will put you through your paces requesting lots of information: it is not a passive process. If you are approaching multiple lenders and requesting several offers, you will waste valuable time, which you often won’t have. If you can’t get borrowing sorted quickly, you will lose out on your deal.
Enness knows all the business bridging loan players in the market, including the most specialist providers and breakout players. They will know exactly who will give you the cheapest, most flexible deal. Often your broker will be able to encourage some healthy competition between providers to get you an even better offer.
For the uninitiated, bridging loans for businesses can seem relatively straightforward, but beware, these are complicated and multifaceted deals. With any bridging loan, speed is of the essence. When it comes to business bridging loans, however, pace is even more important. Bridging finance is (arguably) one of the fastest moving transactions on the market, and there are lots of moving parts you will need to keep on top of.
The stakes are often high, and not every party involved in the deal will have the same motivation as you to move fast. Even something minor like a paperwork delay can mean you will lose out on whatever you are buying or investing in. Having a party like Enness on your side to negotiate the deal and see the transaction through to completion on your behalf is often the difference between a done deal and a deal that goes nowhere.
Enness understands this, and your broker is able to meet these needs. You will receive initial offers in just 24 hours. Thereafter, your broker will be on hand 24/7 to help you solve any issues and roadblocks that could hamper the deal.
Lots of different parties are involved in a business bridging deal, and many of them will have different motivations and will place different significance in seeing the deal through on time. Enness is on your side at every point in the deal, working exclusively in your best interests. Your broker will be available to keep parties and people moving, guide you through any pitfalls and pull the transaction together on time.
When it comes to bridging finance, Enness has seen it all. With experience brokering very large business bridging loans, Enness knows how to troubleshoot, solve problems and how to ensure your transaction is completed on time. Contact Enness to chat about what you might need and how the team can help you with your business bridging loan.Get n Touch Now