Multiple types of bridging loans are available to choose from based on project type. Semi-commercial bridging loans tackle the complex mixed-use market. In this guide, we discuss what they are and how to secure one for your next project.
Bridging loans enable developers to fund their projects by transitioning from one form of financing to another, or providing an extra boost when projects run over budget. The UK’s bridging loans market is one of the standout niches within the financial sector.
According to figures from the BDLA, bridging completions reached a record £2.3 billion in Q4 2024, with most analysts expecting the bridging market to continue soaring in 2025. Within the overall market, multiple types of bridging loans are available to choose from based on project type.
Semi-commercial bridging loans tackle the complex mixed-use market. In this guide, we discuss what they are and how to secure one for your next project.
Semi-commercial bridging loans
Bridging loans are a form of short-term financing that can provide a bridge between two different forms of financing or exit strategies, hence the name.
Semi-commercial or mixed-use bridging loans are designed for properties that have both residential and commercial elements.
The simplest example would be a shop with a residential flat above, or a block of flats with a public gym downstairs. Mixed-use districts are on the rise throughout the UK, with one recent example being the £500 million redevelopment of the Smithfield District in Birmingham.
The difference between commercial and semi-commercial bridging loans
Commercial and semi-commercial bridging finance functions in precisely the same way. They’re designed to be held for just a few months before the borrower refinances or sells the property they’ve borrowed against.
The only real difference is that commercial bridging loans are used exclusively for business locations, whereas semi-commercial loans are for designated mixed-use properties. In some cases, the latter may have slightly different requirements because of the extra complexities of mixed-use properties.
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What can semi-commercial bridging loans be used for?
Semi-commercial bridging loans can be used at different stages of a development. Initially, a developer may use a bridging loan to buy a mixed-use property. This is most common when time is of the essence, such as when buying a property at an auction, which requires full payment within 28 days of winning.
Later on, bridging loans may be used to fund renovations or conversions. These tend to work best when the necessary work can be completed quickly; otherwise, full-scale development finance is usually the better option.
Sometimes, cash flow gaps might also emerge. Many traditional loan types don’t allow extra borrowing on the same loan, meaning a semi-commercial loan can temporarily plug that gap.
Finally, these bridging loans act as a defence when unexpected obstacles impact your timeline and/or budget. For example, if local flooding has brought work to a halt, or you need extra time to sell your property, you might use a semi-commercial bridging loan to pay off an existing loan coming due for repayment. Essentially, you’re refinancing to buy some extra breathing space.
Securing a semi-commercial bridging loan
Applying for a semi-commercial bridging loan follows a similar process with every lender, but remember that each lender will set their own requirements. Always take the time to read through each lender’s requirements, so that you’re not wasting your time.
Generally, anyone can apply for semi-commercial finance if they’re a UK citizen or resident. Individuals and companies are both eligible to apply.
Here are the five steps you can expect to go through.
Complete the application form
Every lender will have an application form for you to fill out. Many will even have a quick enquiry form where you don’t have to supply any supporting documentation until later. Simply add details about yourself and the property against which you will secure the loan.
Receive an Offer in Principle (OIP)
The Bridging Loan Offer In Principle is an initial offer a lender makes if they feel your application meets their requirements. It’s not a guarantee of a loan but an offer pending the valuation of your property. All bridging loans are supposed to be fast, so many lenders will get back to you with an OIP within a few hours to a few business days.
Get a property valuation
The lender will send an RICS surveyor to the property you will use as collateral. These reports confirm that the property is worth what you claim it is on your application. If the property is worth less, the lender may reduce how much they are willing to lend or withdraw their offer entirely.
If speed is of the essence, your lender may allow a remote property valuation, known as a desktop valuation.
Deal with the legal paperwork
Your lender will receive a checklist of the lender’s requirements. Assuming that the surveyor’s valuation report is satisfactory to the lender, the loan will be cleared to proceed under the terms agreed when you signed your OIP.
Your solicitor will then complete the paperwork and ensure all supporting documentation is valid and ready. If your solicitor is happy and the mortgage deed has been issued and signed, your funds will be released to your solicitor’s escrow account to finish the transaction.
You are then entitled to use your bridging funds in full or in part immediately upon receipt. Unlike other loan types within the property sector, such as development loans, there is no phased release of funds or ongoing oversight.
Naturally, we know that finding the right loan for you is rarely as straightforward as it seems. In particular, finding the right lender is often the biggest headache experienced by developers in the UK property sector.
If you are struggling to choose the right loan and find a lender that matches what you need, let Hilton Smythe’s independent financial advisors provide the guided support you need. To learn more about how we can help, get in touch with the team today.