What Is Commercial Bridging Finance?
**Commercial bridging finance** is a short-term secured loan used to fund commercial property transactions when speed, flexibility or circumstances make traditional mortgage lending unsuitable. Bridging loans typically last from 1 to 24 months and are designed to be repaid quickly through a defined **exit strategy** such as a property sale, refinance or business event.
At **Commercial Mortgages Broker**, we arrange commercial bridging facilities for businesses, investors and developers across the UK. This guide explains how commercial bridging works, when it makes sense and how it compares to longer-term finance.
How Commercial Bridging Finance Works
The fundamental principle of bridging finance is straightforward: a lender provides short-term funds secured against property, and the borrower repays the loan within the agreed term using a pre-planned exit strategy.
The Process
- Application: You provide details of the property, the purpose of the loan and your exit strategy
- Valuation: The lender arranges a professional valuation of the security property
- Legal due diligence: Solicitors handle title checks and legal documentation
- Funds released: Once approved, funds can be released in as little as 3-7 days for straightforward cases
- Loan term: You hold the facility for the agreed period (typically 3-18 months)
- Exit: You repay the loan via your planned exit strategy
Speed of Execution
The defining advantage of [bridging finance](/services/commercial-bridging) over traditional [commercial mortgages](/services/commercial-mortgages) is speed. While a commercial mortgage typically takes 8-16 weeks to complete, bridging finance can be arranged in:
- Emergency cases: 3-5 working days
- Standard cases: 1-3 weeks
- Complex cases: 3-4 weeks
This speed makes bridging finance essential for time-sensitive transactions.
When to Use Commercial Bridging Finance
Commercial bridging is appropriate in a wide range of scenarios. The common thread is that the borrower needs funds quickly or the property does not yet meet the criteria for long-term lending.
Property Auction Purchases
Commercial properties sold at auction require completion within 28 days (sometimes 20 days). A standard commercial mortgage cannot be arranged in this timeframe. Bridging finance allows you to complete the auction purchase, then refinance to a mortgage once the immediate deadline has passed.
Chain-Break Funding
When you have committed to purchasing a commercial property but the sale of your existing asset has not yet completed, bridging finance covers the gap. Once your sale completes, the bridge is repaid.
Property Not Yet Mortgageable
Many commercial properties do not meet the criteria for standard mortgage lending because they:
- Are in poor condition and require refurbishment
- Are vacant and need a tenant before a mortgage lender will consider them
- Have short or problematic leases that need restructuring
- Have planning issues that need resolving
- Are undergoing change of use
Bridging finance provides the time and funds to address these issues, after which the property can be refinanced to a longer-term commercial mortgage.
Opportunistic Acquisitions
When a commercial property becomes available at a significant discount and speed is critical, bridging finance enables you to secure the deal before arranging longer-term finance.
Business Cash Flow
Commercial bridging loans can release capital from an existing commercial property to fund business operations, pay a tax bill, complete a business acquisition or meet other short-term cash needs.
Development Situations
While major developments typically require dedicated [development finance](/services/development-finance), bridging can be appropriate for:
- Purchasing a development site before the main development facility is in place
- Funding light refurbishment or conversion work
- Providing short-term capital while planning permission is obtained
**Key Takeaway:** Commercial bridging finance is a tool for solving time-sensitive or structurally complex property funding challenges. It should always be used with a clear, realistic exit strategy.
How Commercial Bridging Differs From Mortgages
Understanding the differences between bridging and mortgage lending is essential for choosing the right product.
| Feature | Commercial Bridging | Commercial Mortgage |
|---|---|---|
| Term | 1-24 months | 5-25 years |
| Speed | Days to weeks | 8-16 weeks |
| Interest | Monthly (higher) | Monthly (lower) |
| Exit strategy | Mandatory and specific | Not typically required |
| Property condition | Flexible | Must be in good condition |
| Tenant requirements | Not always needed | Usually required for investment |
| Arrangement fees | Higher (1-2%) | Lower (0.5-1.5%) |
| Monthly cost | Higher | Lower |
| Purpose | Short-term, specific | Long-term holding |
Cost Comparison
Bridging finance is more expensive per month than a commercial mortgage, but for short-term use this is often irrelevant. The ability to execute quickly can generate savings or profits that far exceed the additional finance cost.
**Example**: You find a commercial property worth £500,000 available for £400,000 because the seller needs a quick sale. A 6-month bridge at 0.85% per month costs approximately £20,400 in interest plus fees. The £100,000 discount more than compensates for the higher finance cost.
Types of Commercial Bridging Loans
Regulated vs Unregulated
**Regulated bridging**: Loans secured against property that is or will be the borrower's primary residence. Regulated by the Financial Conduct Authority (FCA).
**Unregulated bridging**: Loans secured against investment properties, commercial properties or land. Not regulated by the FCA. The vast majority of commercial bridging is unregulated.
First Charge vs Second Charge
**First charge**: The bridging loan is the primary security on the property. No other mortgage takes priority.
**Second charge**: The bridging loan sits behind an existing first charge mortgage. Rates are higher because the bridging lender's position is subordinate. The first charge lender must consent to the second charge.
Open vs Closed
**Closed bridging**: You have a confirmed exit date (such as an exchanged property sale). Lower rates because the risk is lower.
**Open bridging**: No confirmed exit date, though there is still a maximum term and you must have a credible exit plan. Higher rates due to greater uncertainty.
Interest Payment Options
Commercial bridging loans offer several ways to handle interest payments:
Monthly Serviced
You pay interest monthly, similar to a mortgage. This keeps the loan balance stable but requires regular cash flow to meet payments.
Retained Interest
Interest for the expected loan term is deducted from the advance and held by the lender. You receive less cash upfront but make no monthly payments. If you repay early, unused retained interest is refunded.
Rolled-Up Interest
Interest is added to the loan balance each month and paid when the loan is repaid. The total debt increases over time, but you have no monthly payment obligations.
**Key Takeaway:** Retained or rolled-up interest is common for commercial bridging because it removes the need for monthly payments during what is often a period of no income (for example, while a property is being refurbished).
Exit Strategies
The **exit strategy** is the most critical element of any bridging loan application. Lenders must be satisfied that you can repay the loan within the agreed term.
Common Exit Strategies
- Sale of the bridged property: The property is sold and the loan repaid from the proceeds
- Refinance to a commercial mortgage: The property is refinanced onto a long-term mortgage once it meets standard lending criteria
- Sale of another asset: A different property or asset is sold to repay the bridge
- Business funds: Anticipated business receipts (such as a contract payment) repay the loan
- Development completion: For refurbishment bridges, the improved property is refinanced or sold
What Makes a Strong Exit Strategy
- Evidence: Supporting documentation (e.g., mortgage offer in principle, sale agreed evidence)
- Realistic timeline: The exit must be achievable within the loan term
- Contingency: A backup plan if the primary exit is delayed
- Independence: Ideally, the exit does not depend on the same market conditions that created the need for bridging
Security Requirements
Commercial bridging lenders require property security for every loan:
- Commercial property: Offices, retail, industrial, warehouses, mixed-use
- Development sites: Land with or without planning permission
- Semi-commercial: Properties with both commercial and residential elements
- Multiple securities: Some lenders accept cross-charges on multiple properties to achieve higher effective LTV
Loan-to-Value
- Standard commercial bridging: Up to 70-75% LTV
- With additional security: Potentially higher effective LTV
- Development bridging: Based on current value, not projected future value
Who Uses Commercial Bridging Finance?
Property Investors
Investors use bridging to acquire commercial properties quickly, refurbish them and then refinance to commercial mortgages. This **bridge-to-let** strategy is one of the most common uses.
Business Owners
Owner-occupiers use bridging to secure business premises quickly or release equity from existing commercial property for business purposes.
Property Developers
Developers use bridging for site acquisition, light refurbishment projects and gap funding between development stages.
Landlords
Existing commercial landlords use bridging to fund portfolio acquisitions, take advantage of opportunities and manage cash flow between property transactions.
How to Apply for Commercial Bridging Finance
Information Needed
- Full details of the property (address, type, condition, value)
- Purchase price (if applicable)
- Loan amount required
- Intended loan term
- Detailed exit strategy with supporting evidence
- Personal financial information (ID, proof of address, asset statement)
- Source of deposit
Working With a Broker
A specialist broker like **Commercial Mortgages Broker** accesses the full range of bridging lenders and matches your case to the most appropriate funder. Given the speed requirements of bridging, having a broker who can act immediately and has established lender relationships is invaluable.
[Contact us](/contact) to discuss your commercial bridging finance requirements.
Frequently Asked Questions
Below are the most common questions we receive about commercial bridging finance.
*Written by Matt Lenzie, Founder of Commercial Mortgages Broker. Ex-Lloyds Bank & Bank of Scotland.*