BRIDGING LOAN ELIGIBILITY CRITERIA

Welcome to our guide on bridging loan criteria and eligibility. Whether you’re a property developer, investor, or individual seeking short-term finance, understanding these key factors is essential in navigating your way to successful loan approval. This guide is tailored for anyone asking, “Can I get a bridging loan?” and seeking clarity on how to navigate this financial path successfully.

Securing a bridging loan is a strategic process that requires a clear understanding of your objectives and the loan requirements. Bridging finance is designed to ‘bridge’ the gap in funding, typically used for property transactions or development projects. To get started, you’ll need to present a clear case for your loan, including details about the property, the amount you need to borrow, and your exit strategy.

Enquiries can be made through our online form or by directly contacting BIG Property Finance on; info@bigpropertyfinance.co.uk / 0121 348 7830.

Bridging loans are versatile but come with specific criteria. When considering “How to get a bridging loan,” it’s essential to be familiar with the various eligibility factors:

1. What do you need a bridging loan for?

Identifying why you need a bridging loan is critical. These loans are versatile, supporting diverse needs from purchasing auction properties to funding property renovations. Your loan’s purpose will greatly influence its approval.

OUR CRITERIA = At BiG we can only support lending for business or investment purposes, therefore would be unable to offer funding to cover personal debt consolidation or the purchase of a main residence.

2. What type of property is the bridging finance for?

The current use of the property will have a bearing on the loans that may be available and the amount you can borrow. A lender will also consider any planning applications or future planned use of the property that may impact its value and desirability. Residential properties are occupied as someone’s domestic dwelling, whereas commercial properties have some business use, such as retail units, hotels and industrial warehouses. Semi-Commercial property is that which comprises aspects of both uses. Lenders will consider the property’s location and the market for that property type for that area. As a rule, commercial properties will be considered higher risk and then warrant a lower LTV and higher interest rate.

OUR CRITERIA = BiG Can consider lending against residential, commercial & semi-commercial property across England & Wales.

3. How much do you need to borrow?

How much you need to borrow should correspond with your project’s scope and your repayment capacity. Within the calculated costs for your project, you will also need to consider the overall loan fees. Borrowers often underestimate the total cost involved, including interest rates, fees, and additional charges. At BIG we are very transparent about the applicable costs for any loan at the point of enquiry. Common costs include your monthly interest rate, an admin fee, arrangement costs, valuation fees, solicitors’ costs, broker fees and exit fees.

OUR CRITERIA = Our bridging loans typically range from £50,000 to £5,000,000, accommodating various project sizes.

4. How much is your deposit?

The larger your deposit, the lower the risk for the lender. A substantial deposit can also lead to more favourable loan terms. The loan-to-value ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. So, a loan at 60% LTV means you are borrowing the equivalent of 60% of the property’s value. The higher the LTV the higher risk the loan, from the lender’s perspective, and so this can warrant a higher interest rate or more stringent criteria.

OUR CRITERIA = Maximum lending against residential property at 70% LTV, Commercial property 65% LTV.

5. How can the bridging loan be secured?

Bridging loans are secured against property or land, meaning the asset acts as collateral. The type and value of the collateral play a crucial role in loan approval. When an investor is focused on their own property project, it is very easy to get carried away and have a biased view of its value. Investors can also consider the investment value or income value of an asset, however your lender may only be considering the bricks and mortar value. Every lender will therefore need to complete their own due diligence or instruct a formal valuation to establish the property’s true value.

OUR CRITERIA = Lending is subject to the purchase/valuation being supported by an RICS Valuation based on 180-day value of the property (90 days to market plus 90 days to complete the loan.)

6. How long do you need to repay the bridging loan?

Bridging loans are short-term, usually from 1 to 24 months. Clearly outlining your repayment timeline is essential in the application process. It can be beneficial to slightly overestimate your required term to allow for delays or unforeseen circumstances that prevent the timely repayment of your loan, to avoid going into default.

OUR CRITERIA = Minimum term 1 Month, Maximum Term 18 Months.

7. How do you intend to pay off the bridging loan?

Having a solid exit strategy is vital. This could be through the sale of the property, refinancing to a long-term loan, or other means of repayment such as the sale of another asset. Many borrowers are caught short with their exit strategy, by failing to accurately anticipate how long it may take to obtain the necessary funds to repay their loan. Regularly review and update your plan to ensure it remains viable.

OUR CRITERIA = We can consider most exit strategies, with supporting documentation or commentary required on a case-by-case basis.

8. What personal factors could make you eligible or not?

Personal credit history, income sources, location of the property and previous experience in property development can influence your eligibility. Be prepared to provide comprehensive personal and financial information.

OUR CRITERIA = We like to work with experienced property professionals who own existing property, residing in the UK, historic adverse credit can be considered, if settled, we can lend in England & Wales only.

We’re here to help guide you through the bridging loan process. If you have any questions or need further clarification on eligibility criteria, please don’t hesitate to reach out.

Remember, this guide is designed to provide you with the foundational knowledge to assess your eligibility for bridging finance. Every situation is unique, and we encourage a direct conversation to address your specific needs. You could also consider seeking advice from a financial advisor and compare multiple lenders and bridging loan products to find the most suitable option.