Bridging loans are becoming a staple financial service for businessmen, investors, and property developers all over the UK. They provide quick, short-term access to funds, unlike traditional lenders who often work on lengthy timelines. Commercial bridging loan is particularly useful for buying real estate at auctions, refinancing on short notice, or unlocking business equity.
There is no denying how easy a bridging loan may sound; however, one needs to go through an elaborate structure, strong documentation, and careful planning to exit the loan easily. We have compiled some steps that will ensure borrowers in the UK can guide themselves through the application process seamlessly.
Step 1: Make Sure You are Clear on the Purpose
Ask yourself these questions before applying for a bridging loan. For example:
- Purchasing commercial properties.
- Buying and refurbishing or converting an asset.
- Buying time before refinancing.
- Blocking a chain break during a sale.
- Seizing business opportunities for storing capital, tax payments.
In these scenarios, it is vital to have a goal. The list above offers various potential goals one could have. Having a goal is essential as it aids the reliability and helps tailor the stipulations and regal framing of the loan.
Step 2: Develop a Suitable Exit Strategy
UK lenders focus mostly on how you intend to repay the loan. Your exit strategy is essential and must be explained in detail, realistic, and achievable within the life of the loan. Some common exit strategies are:
- Obtaining a commercial mortgage refinance
- Business asset liquidation
- Liquidation of Obsolete Investment:
- Unencumbered firm income or the business’s one-time revenue
Exit strategies may be deemed insufficient, which might result in your application facing lending hurdles.
Step 3: Select the Best Bridging Loan Provider
An application can be made directly with some lenders, whereas others can be reached through a specialized broker. Often, brokers tend to have a wider network of lenders and can be of great assistance in tailoring the most suitable product, considering your specific situation.
While browsing through several lenders or brokers, pay attention to the following:
- How fast is the application and funding approval?
- Value of business and interest rates
- Loan-to-value (LTV) restrictions
- General market perception and experience of members in the commercial field
Step 4: Prepare All Related Documentation
It is a common norm for most lenders to request several documents that validate your claims regarding risk evaluation. Prepare the following in advance:
- Sketches and the title of the registered property or land serving as collateral
- Proprietary documentary evidence or purchase agreement
- Financial statement of the firm (if applicable)
- Relevant exit strategy and supporting documents
- Copy of identification and proof of residence
- Valuation report as instructed by the lender
Organization especially with respect to documentation goes a long way in fast-tracking the process of application for other subsequent phases.
Step 5: Receive an Official Offer and Analyze the Conditions
After receiving your application and all the relevant supporting documents, the lender’s next step is to prepare an official offer for you.
Step 6: Legal Process and Completion
Your solicitor and the lender’s solicitor will jointly undertake due diligence and legal documentation.
Conclusion
It does not have to be daunting applying for a commercial bridging loan in the UK. Buying a property, raising business funds, or covering a shortfall, this funding can be an essential tool where speed is of the essence.
