Bridging Finance for Property Development FAQs
Whether you are looking to acquire land, renovate existing properties, or embark on a new construction project, bridging finance is a vital source of capital, propelling your property development endeavours to fruition.
At Bridging Loans Direct, our bridging loan brokers are highly experienced in development finance and can help with:
- Bridging finance from £50K to £25M
- Loan terms of 1 to 36 months
- Quick access to capital (5 to 7-day turnaround is often possible)
- Monthly or rolled-up interest (where you pay all of the interest at the end of the loan term)
- Loans with no upper age limit
- Commercial and residential property finance
- FCA regulated and unregulated bridging loans
- Property bridging finance for individuals, sole traders, partnerships, limited companies and trusts
To find out more about bridging finance for property development, fill out our contact form or call us now on 0800 368 9344.
What is Bridging Finance?
A bridge loan is a type of short-term loan for property development, with terms ranging from 1 to 36 months. They can cover construction and development costs throughout the timeline of a property development project.
The flexibility and speed of bridging finance make it an ideal choice for property developers.
Traditional financing options often involve lengthy approval processes, hindering progress and delaying project commencement. In contrast, bridging finance offers a streamlined approach, allowing you to access funds promptly and take advantage of time-sensitive opportunities.
For property developers, bridging finance can provide funds for several types of development projects, such as:
- Buying development sites when their capital is tied up in existing projects.
- Purchasing renovation or change of use projects that may not qualify for traditional mortgages.
- Acquiring properties at auctions to redevelop them.
- Undertaking build-to-let projects, where developers construct properties for the rental market.
- Engaging in self-build home developments, enabling individuals to build their residences.
Bridging finance for property development provides quick access to short-term funds for developers. It bridges the gap between immediate financing needs and long-term solutions. Here's how it can help you with your property development projects:
The Benefits of Bridging Finance for Property Development
Bridging finance offers fast access to capital, with a streamlined application process and funds available within days.
It provides temporary funding for 1 to 36 months until long-term financing or property sale.
Bridging loans range from £50,000 to £25 million, with options for repayment terms and interest payments.
It supports diverse development projects like site purchases, renovations, auctions, build-to-let, and self-build homes.
Loans can be secured against the development site or other properties to ensure better rates, allowing you to borrow more.
Funds can be received in stages, allowing interest payments on the capital already taken. Additionally, there are multiple ways in which you can repay interest - whether that's retained or rolled up to be paid at the end of the loan term.
Bridging finance is available through private and specialist lenders. Getting in contact with our brokers can help you explore suitable financing options.
"Embarking on a property development journey? Explore 'Everything You Need to Know About Development Loans' in our insightful video. Here are some personal insights, shedding light on vital aspects that pave the way for your project's success."
- Sam O'Neil, Head of Bridging
How to Get a Property Development Bridging Loan?
Private Banks and lenders typically offer these types of property development loans through intermediaries, like bridging finance brokers, instead of dealing directly with the public.
Property developers often secure short-term development finance against the development site but may also choose to secure the loan as a second charge on other properties they own. This allows them to obtain better rates or borrow more.
When taking out bridging finance for property development, there are a few costs to consider. Firstly, an arrangement fee is typically charged around 1% to 2% of the loan capital. This fee is paid when the loan is taken out.
Additionally, interest is set on the loan, usually monthly, or it can be rolled up and paid at the end of the loan term. Property development projects will often have drawdown facilities arranged, in which interest is only paid on the amount drawn down. This keeps borrowing costs down.
Another important aspect when applying for a bridging loan is specifying an exit strategy, explaining how the loan will be repaid.
Common exit strategies for property developers include:
- Selling the developed property.
- Selling previously developed properties.
- Refinancing with a residential or buy-to-let mortgage.
We specialise in raising bridging finance on residential and commercial property developments. Through our professional service, we’ll help borrowers obtain the necessary funds at competitive rates for their specific requirements.
What are the Eligibility Requirements for Bridging Finance?
Specialist lenders will prefer borrowers with a proven track record in property development with relevant experience. They’ll Lenders assess your financial situation, including income, assets, and credit history.
Lenders also consider the property value you intend to develop and offer loans up to a certain percentage of its value (Loan-to-Value ratio).
With property development loans, lenders value a property, land, or development site, based on the GDV (Gross Development Value). This means that you will be able to take out a bridge loan based on the expected value of the completed development.
However, you must be able to demonstrate how you can repay the loan within the agreed-upon term.
Lenders will conduct a property valuation to determine its current market value and evaluate its suitability as loan security. They assess the location, condition, resale value, and development feasibility.
The Financial Conduct Authority (FCA) regulates bridging finance in the UK. Working with lenders or brokers operating within the regulatory framework is vital to ensure transparency and consumer protection.
What can Bridging Finance be used for in Property Development?
Bridging finance offers funding support at various, crucial stages of the process. Property developers can utilise bridging finance for a wide range of projects, including:
Bridging finance provides quick access to funds for purchasing land, particularly for time-sensitive transactions or property auctions. It enables developers to secure the desired plot without delays.
During the approval phase, bridging finance covers expenses associated with planning applications, surveys, and architectural designs. Developers can utilise these funds to navigate the planning process smoothly.
Refurbishment and Construction
Bridging loans offer short-term capital for property refurbishment or construction projects. Whether it involves light or heavy renovations or extensive structural changes, developers can rely on bridging finance to finance these improvements swiftly. Additionally, bridging loans can cover considerable costs, if the project is of a larger scale and complexity - take a look at our large bridging loans guide to understand more.
Bridging finance acts as a bridge between project completions and securing long-term financing options like mortgages or refinancing, or development exit finance. This provides developers with the flexibility to repay the loan once they confirm the desired long-term financing solution.
In this case study, read how our strategic financing solutions enabled clients to secure a prime land purchase, navigate complex challenges, and fund a successful property development journey in Croydon.
How to Apply for Property Development Bridge Finance?
You'll first want to research and identify lenders specialising in property development bridge finance.
“You can compare lenders, and bridging loan rates, for property development loans through our comparison software which pulls quotes from over 40 development finance lenders in minutes, and you can use it for free.”
- Sam O'Neil, Head of Bridging
With that said, here's the specifics on the application process.
Firstly, you'll need to provide detailed information about your development plans and financial needs during the consultation. The specific documents required may vary depending on the lender and the nature of your project, but commonly requested documents include the following:
- Personal identification documents (passport, driver's license)
- Proof of address (utility bills, bank statements)
- Business plan or project proposal
- Purchase and sale agreements or contracts
- Valuation reports or property appraisals
- Building plans and specifications
- Planning permission or permits (if applicable)
- Financial statements (personal and business)
- Bank statements (personal and business)
- Tax returns (personal and business)
- Proof of income (pay stubs, rental income, etc.)
Depending on project feasibility, profitability, and financial standing, lenders will assess your application. The lender will provide a formal loan offer with detailed terms and conditions if approved.
It is always a good idea to thoroughly review and understand the terms of the loan and the offer beforehand. Once all requirements are met, the lender will disburse the funds, allowing you to proceed with your property development project.
Are there Alternatives to Bridging Finance for Property Development?
There are several alternative options for development finance. Some popular alternatives include traditional mortgages, equity financing, joint ventures, mezzanine financing, development loans, and crowdfunding.
These alternatives offer different terms, repayment structures, and funding sources, allowing developers to choose the option that best suits their needs. Consulting with a financial advisor or a specialist in property development finance can help determine the most suitable alternative for a specific project.
Discover how a strategic bridge loan solution revitalised a stalled property development project. Dive into the journey of our clients who overcame funding obstacles to complete their dream new build home in just 2 months.
Need Help with Bridge Finance?
At Bridging Loans Direct, we offer tailored bridge finance solutions for property development projects. As experienced development finance brokers, we connect you with lenders who understand the intricacies of property development, providing personalised financing that aligns with your project requirements. With access to the entire market and our extensive network of lenders, we secure competitive rates and favourable terms, giving you the financial edge you need.
Our experienced team simplifies decision-making by providing expert guidance throughout your bridge finance journey. We ensure clarity and support, making complex financial decisions easier to navigate.
We diligently search for affordable and favourable finance options that suit your budget and objectives, enabling you to proceed with confidence with the best bridging loan available.
Contact us today to discuss your property development needs and let us help you find the right bridge finance solution. Contact us at 0800 368 9344 or book a consultation below.
Can I get bridging finance for both residential and commercial property development?
Yes, you can raise bridging finance for both residential and commercial property developments. At Bridging Loans Direct, we offer development finance with flexible terms for various properties, including residential (on a regulated basis), buy-to-let, HMO, investment, and commercial properties. We also provide financing options for light refurbishment, heavy refurbishment, and bridging development finance. Additionally, you can get a business bridge loan for business purposes such as purchasing land or new premises.
How long does it take to get approval for property development bridging finance?
The approval process for property development bridging finance can be fast. It is often possible to gain quick access to capital, with a turnaround time of 5 to 7 days. Once you submit your application and the necessary documentation, the approval process can be completed within a week. However, it's important to note that the actual timeframe may vary depending on factors such as the complexity of the project, the lender's requirements, and the completeness of your application.
Can I obtain bridging finance for property development with bad credit?
It may be challenging to secure bridging finance for property development with bad credit. Lenders typically assess creditworthiness during the application process, and a poor credit history can be a significant obstacle. However, it's still possible to explore options by working with a bridging finance broker specialising in dealing with lenders who consider applicants with bad credit. They can help you navigate the process and find suitable solutions based on your circumstances, even if you're a first-time developer.