Why use a bridging finance broker?

Written by: Mark Lanario CeMAP CeRCH

Bridging finance can be a very useful tool for many small developers.

It helps to secure the funding necessary to cover the costs of building works on a property you have bought. And, bridging loans are a way of easily and quickly securing the short-term funding you are likely to need.

For that reason, bridging loans are prevalent among developers and builders, with £831m lent in 2023.

With so much borrowing in the offing, there are naturally numerous lenders fuelling the market. So, how do you select the one most suitable for your particular needs and requirements?

The answer is likely to lie with a bridging finance broker.

How can a bridging finance broker help?

The principal of a bridging loan is simple and straightforward.

You take a short-term loan, secured against the property you intend to develop. This allows you to carry out your building works and repay your loan within a relatively short space of time – i.e. once the works are completed, and you receive the proceeds from its sale or remortgage.

It might be simple in theory but in practice getting the bridging loan on the terms that are favourable to your business and to the development project you propose is likely to be more complicated, as well as slow.

You may also need to decide between a bridging loan and development finance. Which one suits your project the best?

bridging loan finance broker can not only guide you through the intricacies of the process, but also help in the following practical ways:

Understanding your project

  • potential lenders have a keen interest in what your project involves;
  • your broker is there to ensure that you present as strong a business case as possible which should include a robust exit strategy – to enhance your prospects of any application being approved;

Matching your needs to the bridging loans available

The broker’s network

  • brokers maintain close working relationships with an extensive network of lenders and can scour all of those contacts for the bridging loan appropriate to the needs and circumstances of your particular business – whether you are a sole trader, a partnership or a limited liability company;
  • in many cases, lenders within that network reserve certain deals which are available only to brokers – deals that you are unlikely to be offered if you had approached the lender direct;

Property type

It’s well known that bridging loans can be secured against any type of property, even those that cannot be lived in. Yes, the valuation will be low, but it does give you access to funds.

Interest rates

  • although that bridging loans typically attract a higher rate of interest than regular secured finance, your broker shares your interest in securing the most competitive rate of interest on your loan;

Repayment terms

  • bridging loans for development are typically short-term loans, repayable within 12-24 months. But if you have a project that you already know is likely to overrun or suffer delays, your broker is well placed to negotiate such an extension;

Deposit strategies

  • we hope that we have explained that bridging lenders are really flexible, they absolutely do want to lend. So how can you fund a 25% deposit when you don’t have the cash in the bank? If you own other properties then the lender can borrow against them as well. Learn more in our Guide to Bridging Loan Deposits.

Speed

If you are looking for bridging finance to fund your next development or building project, please contact us or phone us on: 020 8301 7930. We’d be delighted to discuss your options.

Further reading: Bridging finance – an introduction.

Mark has helped clients with holiday lets since 2006 and is Head of holiday let, hotel and development finance.
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