A bridging loan provides businesses with the ability to quickly purchase a new asset or invest in a new property without having to wait for current assets or capital to sell before gaining access to their funds.

Let’s take a look at an example. If you are selling a property with a value of £400,000, and have £200,000 worth of collateral in the building in the form of a mortgage, and are looking to acquire a new property which is valued at £500,000, you may be able to access up to £200,000 in loan finance, secured against the value of your mortgage.

You can purchase your new property with the borrowed funds, and when your old one is sold and the money is freed up, you can repay the £200,000 loan you used to expand into your next property.

Because your bridging loan is secured against the value of your existing property, the lender will have financial protection as they are able to recover any potential lost funds through the collateral you agreed to secure against the bridging loan.

Once your current property has been sold, the proceeds can be used to pay off the bridging loan. Generally, how long you have to pay off the bridging loan will depend on how quickly your current property sells, with Nucleus, this can be between 3 months and 7 years, depending on the agreement.

Due to the way bridging loans work, where funds are supplied in order to secure an asset, the guarantee you put forward as collateral instead acts as a deposit, giving the lender security against your loan.

In the case of a property purchase, the lender may secure the loan against the property you are purchasing, or another property you own. This means that if you fail to repay the loan within the agreed time frame, the lender can take possession of the guarantee used as collateral in order to recover their money.

Just how a regular financial deposit works, the larger the loan you seek, the larger your agreed collateral will need to be.

With Nucleus, our bridging loan facility can be utilised to borrow between £25,000 and £20 million. How much you can borrow will depend on the collateral you can put up to back your loan, and the financial health of your business.

A business that has a good financial record and considerable collateral is more likely to have its bridging loan application approved. Transparency from the get go between borrower and lender will help with the speed of your application, and allow us to hastily assess how much finance your business is eligible for.

Similar to other loan types, there are a number of basic criteria we require from potential borrowers before they will be considered for a bridging loan. These are:

• 3 months of business bank statements
• A recent set of unabbreviated filed accounts
• Any other supporting documents such as cash flow forecasts

If you are intending to start a new business, we require:

• A comprehensive business plan
• Proven profitability in recent accounts

Assuming these criteria are met, we will then consider your loan request, and complete a valuation on the property you intend to use as collateral. If all proposed values are satisfactory, we can then proceed with your bridging loan application.

Financing from our bridging loan facilities typically takes between 2 – 3 weeks. The application process involves an initial consultation with a Nucleus advisor, who will assess your needs and provide you with a tailored solution.

From there, you will need to provide the necessary documentation and undergo a credit check. Following this, a decision on your loan request can be made. We have no intention of causing your flourishing business to wait any longer than it needs to, so the more prepared you are when presenting your documents to us, the smoother the application process will run.

If you decide that a bridging loan is not the best option for your business right now, there are lots of other loan alternatives to consider. These still include short term facilities which can help your business take advantage of up and coming opportunities for growth, without committing to a long term agreement if that isn’t what you want.

In particular, Nucleus offers small business loans with terms as brief as 3 months, allowing you to easily manage your short term cash flow needs and finance upcoming projects. If eligible, you can utilise the facility and quickly pay it off.

Revenue based loans are another short term finance option which can be used by businesses seeking quick access to capital when other facility options are currently unavailable.

It is worth enquiring with the Nucleus team about all potential loan options. We are always available to answer any outstanding questions you might have, so do not hesitate to contact us on – 020 7839 1980 – alternatively you can request a call back at a time convenient to you.

A UK bridging loan can be a great way to finance a property purchase, but there are also some potential downsides to consider. Here are some of the key advantages and disadvantages of taking out a UK bridging loan:

Advantages:

-Bridging loans can be a quick and easy way to raise finance for a property purchase.

-Bridging loans can be used for both commercial and residential properties.

-Bridging loans can be suitable for short-term or long-term financing needs.

-Bridging loan interest rates can be competitive.

Disadvantages:

 -Borrowers will be required to provide security against the loan in the form of assets such as property or equity in another property.

 -There can be high fees associated with taking out a bridging loan, including arrangement fees, valuation fees and exit fees.

 -The loan must be repaid in full at the end of the term, so borrowers need to ensure they have a plan for repaying the loan.

Always seek further advice from a professional whenever you are considering any type of loan, and gather as much relevant information as you can before proceeding with your application so both you and your potential financier have transparency and can develop trust when committing to each other.