What is a bridging loan? Timing is everything in finance. Whether you are a developer seizing a time sensitive opportunity, require fast funds for new stock, have a new business venture, an auction purchase, a buy to let, an unexpected tax bill, a refurbishment or many other business purposes, conventional finance often moves too slowly. This is where bridging loans excel.

What are Bridging Loans?: Understanding This Fast Financing Option

A bridging loan is a short-term financing solution designed to ‘bridge’ the gap when you need funds quickly, for property purchases, renovations or business cash flow. Unlike traditional finance that can take months to arrange, bridging finance can be secured in a matter of days, making it invaluable when speed is essential.

These loans are secured against property and typically last from 1 month to 12 months. According to the Association of Short Term Lenders, bridging loan volumes have increased significantly year-on-year as more people discover their benefits. They are particularly useful when:

  • You need to purchase a property before selling your existing one
  • You are buying at auction and need funds well within the typical 28-day completion window
  • You are purchasing a property that isn’t mortgageable in its current state
  • An unexpected tax bill is received
  • A new business venture requires funding
  • Cash flow is causing issues in your business(es)

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How Bridging Loans Work: The Mechanics Explained

The Structure

Specified Loan Term: A definite exit date—this is how long you need the bridging loan for.

What Makes a Bridging Loan Different from Traditional Mortgages?

Many people ask what exactly is a bridging loan compared to other financing options. The key difference lies in its short-term nature and specific purpose.

The Process

  1. Application: First and foremost, you provide details of the security property being proposed, purpose of the loan, and your exit strategy.
  2. Valuation: Our expert team performs a desktop valuation. The Royal Institution of Chartered Surveyors reports that rapid property acquisitions often benefit from this streamlined approach.
  3. Offer: Once approved, you will receive a loan offer outlining terms and conditions.
  4. Legal Work: Solicitors complete the necessary legal requirements.
  5. Completion: We transfer funds, typically within a short few days of application.

Interest and Repayment

Interest on bridging loans:

Rolled-Up Interest: Interest is added to the loan and paid when the loan is repaid. This means you get the very best cash flow position, typically not having to pay anything until the end of the loan term.

Most bridging loans are repaid through a clear exit strategy, such as:

  • Selling the property
  • Refinancing with a longer-term mortgage
  • Using funds from another source (business proceeds, inheritance, etc.)

The Costs Involved

Bridging finance typically carries higher interest rates than standard mortgages—this rate is quoted on a per case basis. We base this on risk, security, funds required and timescales. Additional costs include:

  • Arrangement fees
  • Legal fees
  • Setup fees

Meanwhile, costs are typically rolled up until the end of the term, so there is usually nothing to pay in advance.

Advantages of Bridging Loans

  • Speed: We provide funds available in days rather than weeks or months
  • Eligibility: We accept adverse credit
  • Flexibility: You can use bridging loans for many business-related purposes
  • No Early Repayment Charges: You can repay most bridging loans early without penalties
  • Practical Solution: Bridging loans solve timing issues in many critical areas

Potential Drawbacks

  • Higher Cost: Interest rates and fees are typically higher than standard mortgages
  • Short-Term: Not suitable for long-term financing needs
  • Risk: If your exit strategy fails, you could face additional costs or property repossession
  • Security Required: Requires property as collateral

Why Choose Mallard Bridging?

At Mallard Bridging, we understand that opportunities wait for no one. Our streamlined approach delivers funds when you need them most:

  • Rapid Decisions: We provide initial decision often within hours, not days
  • Simplified Process: We require minimal paperwork and straightforward requirements
  • Experienced Team: Our specialists who understand property and finance
  • Flexible Terms: We tailor solutions to your specific situation
  • Transparent Costs: We offer a clear fee structure with no hidden surprises

Our clients consistently tell us that our speed and efficiency has made a hugely positive impact on their success.

Is a Bridging Loan Right for You?

Consider a bridging loan if:

  • You need funds quickly for business purposes
  • You are confident about your exit strategy
  • The opportunity cost of waiting for traditional financing outweighs the higher interest rate

However, bridging finance isn’t suitable for everyone. If you are uncertain about how you will repay the loan or if you need long-term financing, other options might be more appropriate.

Case Study: From Auction to Profit

For example, consider John, a property developer who spotted a neglected Victorian terrace at auction with excellent potential. With just 28 days to complete after the hammer fell, traditional mortgage lenders couldn’t move quickly enough. A £320,000 bridging loan being provided within 4 days, allowed John to purchase and renovate the property. Three months later, John sold it for a substantial profit and repaid the bridging loan.

How to Apply

Applying for a bridging loan with Mallard Bridging is straightforward:

  1. Complete our simple online application
  2. Receive an in-principle decision, often within hours
  3. Submit the required documentation
  4. Our team performs a desktop valuation
  5. Solicitors complete the legal work
  6. We transfer funds to your account
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Conclusion

In conclusion, bridging loans provide a valuable solution when speed and flexibility matter most. Understanding what a bridging loan is and how it can benefit your situation is crucial before applying. While they come at a premium compared to traditional mortgages, the ability to act quickly in competitive markets or challenging circumstances can be invaluable.

At Mallard Bridging, we are committed to making property finance accessible when you need it most. Our experienced team is ready to guide you through the process and help you secure the funds you need—in days, not weeks.

Therefore, if you need rapid financing for your project, we’re here to help. Ready to explore how a bridging loan could help with your business plans? Apply today or contact our team for a no-obligation discussion.