What is a bridging loan used for?

Typically to cover a short gap, for example buying a property before another one sells, funding a purchase at auction, paying for refurbishment before refinancing, or covering a delay in longer-term funding.

What is an exit strategy?

It's the plan for how the loan will be repaid, such as selling a property or refinancing onto longer-term borrowing. Lenders usually want to see it before they lend.

How long does a bridging loan last?

They're short-term, often measured in months, with some running to a year or longer. Terms vary by lender and loan.

Business bridging loans explained: how they work and the risks

The short answer

A bridging loan is short-term finance, usually secured on property, designed to "bridge" a gap until longer-term funding or a sale comes through.
Because it's secured on property, the property could be at risk if the loan isn't repaid.
Lenders want to see a clear plan for how it will be repaid, often called an exit.
Costs can include interest, arrangement fees, valuation and legal fees, so the total matters more than the monthly rate.

Sometimes a business needs money quickly, for a short time, against something it already owns. A bridging loan is built for that. It "bridges" a gap between a need for cash now and a repayment source that's coming later.

How a bridging loan works

You borrow a sum, usually secured on property with a legal charge placed on it.
The loan runs for a short, fixed period, often months.
You repay in full at the end, typically from a sale or by refinancing onto longer-term borrowing.
Interest may be paid monthly, or added up and paid at the end, depending on the loan.

Lenders may be able to move more quickly than traditional banks, because they focus on the property and the repayment plan as much as on income. Even so, valuations and legal work take time.

What it's used for

Common business uses include:

Buying a property or premises before another one is sold
Funding a purchase at auction, where completion deadlines are tight
Paying for refurbishment or development before refinancing
Covering a gap while longer-term funding is arranged
A one-off cash need where a property is available as security

The exit: your plan to repay

A lender wants to know how the loan will be repaid before it lends. This is called the exit strategy. Common exits are:

Selling the property or another asset
Refinancing onto a longer-term loan or mortgage

A weak or uncertain exit is the main risk with bridging. If a sale takes longer than expected or refinancing falls through, the loan can run past its term, and extra charges and interest can follow.

What it costs

Bridging is a short-term, specialist product, and it can cost more than a conventional loan. Costs often include:

Interest, which may be quoted monthly
Arrangement fees, often a percentage of the loan
Valuation fees and legal fees, which are usually separate
Exit or redemption fees in some cases

Because the loan is short, small differences in monthly interest or fees can change the total a lot. A full breakdown of the total repayable, including any fees, is worth asking for before going ahead.

The risks to understand

Your property could be at risk. If you can't repay, the lender can use its charge over the property to recover what it's owed.
Delays can be expensive. Extension fees and default interest may apply if you run over.
Regulation can differ. Bridging on a home that you or your family live in can be regulated differently from business and investment property. This guide covers business borrowing secured on commercial or investment property.

Alternatives that may be relevant

Depending on the need, other options may be worth comparing, such as a secured business loan, asset finance or a longer-term mortgage. Our guide to getting a business loan in the UK outlines the options. An accountant or solicitor can advise on your own circumstances.

What lenders ask for

Expect to provide details of the property, a valuation, your exit plan, ID and your recent finances. Our guide to documents for a business loan lists the usual paperwork.

Getting help comparing

We're a commercial finance broker, not a lender. We introduce your business to the lenders on our panel, including bridging lenders, so you can compare without approaching each one yourself. It's free to check, and any fee is confirmed before you proceed. All funding is subject to eligibility and credit assessment, and secured lending puts your property at risk.

You can check your options in a few minutes, with no obligation.

Common questions

What is a bridging loan used for?: Typically to cover a short gap, for example buying a property before another one sells, funding a purchase at auction, paying for refurbishment before refinancing, or covering a delay in longer-term funding.
What is an exit strategy?: It's the plan for how the loan will be repaid, such as selling a property or refinancing onto longer-term borrowing. Lenders usually want to see it before they lend.
How long does a bridging loan last?: They're short-term, often measured in months, with some running to a year or longer. Terms vary by lender and loan.

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This guide is general information for UK businesses. It is not financial advice, and business funding must be repaid. Kapitl Business Finance Limited is a commercial finance broker, not a lender; all funding is subject to eligibility and credit assessment.