The growth of bridging finance

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According to a article from January 2017, £750 million worth of bridging loans were arranged in 2011, and this jumped to £4bn in 2016, representing a fivefold increase.

Over the last few years, many bridging loan companies have formed and this has created a competitive market with loans available at low interest rates.

Bridging loans can arranged for as little as £25,000 and up to £25m. They are short-term loans available for 3 months to 12 months, though a minority of lenders will arrange loans for up to 24 months.

A bridging loan requires security, usually in the form of property, but some lenders will consider a stake in the business as security. Cars, jewellery and other valuable artifacts can sometimes be used as security, but these arrangements are rare.

The majority of bridging loans are related to property, whether to complete the purchase of property or for redevelopment. Businesses can also use bridging loans to upgrade premises, and purchase stock or equipment,

Lenders will also consider bridging loans for startups. These could be used, for example, for pre-Christmas marketing, with the loan paid back in the New Year from increased sales during the Christmas period.

Bridging loans are short-term, flexible agreements that usually carry no penalties for early settlement. The best place for advice, and to arrange a bridging loan, is through a broker who will have access to a wide range of deals, thus enabling them to match a borrower’s individual requirements to the best bridging loan deal.

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