Known for their speed and flexibility, bridging finance provides businesses of all sizes the immediate cash injection needed to plug cash flow gaps and pursue new opportunities.
Bridging loans is quickly becoming a significant portion of the UK business lending market. Known for their speed and flexibility, bridging finance provides businesses of all sizes the immediate cash injection needed to plug cash flow gaps and pursue new opportunities.
According to the Bridging & Development Lenders Association (BDLA), Q3 2024 saw a record £1.79 billion in bridging completions. It illustrates how popular these financial instruments are becoming in every sector.
But how fast can you receive your money if you want to apply for a bridging loan?
Is it easy to get a bridging loan?
How easy it is to gain approval for a bridging loan depends on your organisation’s circumstances. Lenders ultimately evaluate your application based on perceived risk.
Anything you can do to reduce this risk perception will increase your chances of getting approved.
Although every business’s situation is unique, these three factors have the most influence on your application:
1. Collateral – Putting up more or higher value collateral to secure the loan increases your chances of success because it reduces the overall loan-to-value (LTV) ratio.
2. Creditworthiness – Your business credit is less critical for this type of loan, but it still matters. Improving your credit history will always work in your favour.
3. Exit Strategy – Your exit strategy is essentially how you intend to repay the loan. Most businesses sell a high-value asset or refinance into a longer-term solution to repay their loans. Which exit strategy you use pales in comparison to whether it’s clearly defined and realistic.
Naturally, like all other loans, your mileage will vary based on the lender you’re working with. Some are more stringent and move quicker than others.
How long does it take to get a bridging loan?
Generally, the quickest approval times for bridging loans are three to five business days. Nevertheless, bridging loans remain the fastest type of loan available in today’s market.
Some companies claim to approve your loan within 24 hours. These are relatively rare, and businesses often confuse the 24-hour timescale with the time it takes to receive their money. What it actually means is you may receive a Decision in Principle (DIP) within 24 hours, but funds are usually released in two weeks.
However, working with a lender offering 24-hour DIPs usually means higher interest rates. Today, average rates range from 0.4% to 2% monthly, but rates are nearly always higher with so-called premium approval services.
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What can delay a bridging finance application?
Average bridging loan application turnaround times assume that your application is perfect and there are no snags along the way. Firms looking for lightning-speed approval should bear in mind some of the factors that could stand in their way before applying.
It’s also worth mentioning that unregulated bridging loan providers can act quicker than regulated ones. Unregulated loans aren’t beholden to any Financial Conduct Authority (FCA) oversight, meaning less rigorous checks and fewer chances of getting tangled up in red tape.
Typically, the best way to avoid unnecessary delays is to work with a bridging loan broker who knows the nuances of the UK’s lending market. They’ll work with you to ensure a complete application that matches your specific lender’s requirements.
Factors affecting how quickly you can get a commercial bridging loan
Certain checks cannot be avoided, such as the valuation of the property you’re using as collateral for the loan. However, certain factors are well within your control and can speed things up.
Other than ensuring that your application is accurate and complete, with the relevant supporting documentation, here are the primary factors influencing the speed of your bridge loan.
Opting for higher rates
Most businesses want the lowest rates possible, but if speed is your primary concern, opting for higher rates can speed up your loan application. Quicker turnarounds mean higher rates because they involve fewer checks and more risk for the lender.
However, opting for above-average rates may make sense if there’s a lucrative opportunity about to slip through your fingers.
Waive the survey
Property surveys are a fundamental part of these secured loans. Most lenders provide a quick DIP, but a firm offer isn’t made until after a comprehensive property survey. Some lenders enable borrowers to waive the survey in exchange for a desktop survey or a lender site visit. Naturally, expect to pay higher rates as a trade-off.
Explain any credit issues
Business credit checks won’t derail your bridging loan application like applying for a conventional commercial mortgage. Nevertheless, credit checks are a standard part of a lender’s due diligence and uncovering issues mid-way through an application will put your ambitions on hold.
Be upfront about issues like County Court Judgements (CCJs) and previous bankruptcies as part of your initial application.
Focus on your exit strategy
Your exit strategy is the pivotal part of your application. Lenders want to know how you will repay your bridging loan and the viability of that plan.
Pay special attention to how you’ll repay your loan and provide supporting evidence. For example, if you’re selling a redeveloped property, provide market research to demonstrate how quickly you can execute this as your exit strategy.
Don’t get tempted to exaggerate your numbers. Lenders use specialists when assessing exit plans.
Use a specialist broker
How much do you know about the current state of the British bridging finance market?
The chances are you aren’t up-to-date on the nuances of the market, which is why working with a specialist broker is the smartest move you can make. They’ll source the best rates and the most suitable lenders based on your plans and financial circumstances.
At Hilton Smythe, our team specialises in supporting businesses in their growth ambitions.
We’ll pair you with optimal funding solutions that align with your vision. To take advantage of our decades of collective experience, contact us today.