What is Commercial Bridging Finance?

Commercial bridging finance is a form of loan that is used to provide funds to purchase a new business asset, whilst awaiting the proceeds of the sale of a previous asset. Most usually commercial bridging finance will apply to commercial property, but in certain situations it could be used to fund the purchase of high cost plant and equipment.

In many ways, commercial bridging finance should be seen as a last resort solution to a short term problem. This form of finance is offered at an increased interest rates and will often carry a hefty setup fee. Other forms of finance should be explored fully before committing your business to any form of commercial bridging finance.

There are two fundamentally different forms of commercial bridging finance. First we have what is known as “closed” bridging finance, this is offered to a borrower when the contracts have already been exchanged on the property that is being sold to fund the new purchase. Borrowers see this as a fairly low risk form of lending, as property deals seldom fall through once contracts have been exchanged. The second form of commercial bridging finance is termed “open” and is used to facilitate the borrow to make the purchase of their new property before their old property has actually been sold, this form of loan may even be used when the existing property has not even been put on the market.

If you are applying for open commercial bridging finance, the lender may insist on seeing a mountain of supporting evidence. They will require full details of the property you intend to purchase along with full disclosure of the offer you have made, they will also very likely ask to see a complete business plan and set of audited company accounts, and expect you to have some form of plan in place to cover the eventuality that you reach the end of term and have not sold your existing property.

Commercial bridging finance is an incredibly complex form of loan, any business owner who is considering applying would be well advised to avail themselves of the services of a professional commercial mortgage broker. The broker will be able to help you find the best commercial bridging finance for your particular situation, along with assisting you with preparing the documentation to accompany your application. They will also be on hand to give help and advice throughout the entire application process and to help resolve any unforeseen problems that may arise.

Without a professional broker at your side, and acting on your behalf when applying for commercial bridging finance, it is unlikely that a successful outcome will be achieved, the business of commercial loan application is vastly different from personal finance products, and require an amount of industry expertise to ensure that the right products are sourced and that the correct lenders are approached for the situation at hand.