What a bridging loan is for
A bridging loan is short-term finance secured on property. It exists to bridge a timing gap: the business needs money now, and a known event later will repay it. Typical terms run from 3 to 18 months.
Common uses for limited companies include buying a property before a longer-term mortgage can be arranged, buying at auction where completion deadlines are short, funding light refurbishment before refinancing onto a term loan, releasing equity from an existing property to fund a time-sensitive opportunity, and breaking a chain when a sale and a purchase do not line up.
How lenders size a bridging loan
Bridging lenders lend against the value of the property, so the main measure is loan-to-value (LTV): the loan as a share of the property's value. The maximum LTV depends on the lender, the property type, the borrower's experience and whether the loan takes a first or second charge. Lenders rely on an independent valuation, and for some deals they consider both the current value and the expected value after works.
Because the loan is short, lenders care less about long-term affordability and more about two questions: is the security good enough, and how certain is the repayment? A bridging lender will usually take a legal charge over the property and, for smaller companies, personal guarantees from the directors.
Why the exit decides the deal
Every bridging loan needs an exit: the specific way it will be repaid. The usual exits are the sale of the property, a refinance onto a commercial mortgage or investment loan, or another identified source of funds such as the completion of a separate sale.
A credible, evidenced exit is the single most important part of a bridging application. A sale exit is judged on realistic pricing and demand for the property. A refinance exit is judged on whether the property and the business will meet a term lender's criteria when the bridge ends. Lenders price and size the loan on how certain that exit looks.
How interest is paid
Bridging interest is usually quoted as a monthly rate rather than an annual one. There are three common ways to pay it, and many loans combine them.
| Structure | How it works | When it suits |
|---|---|---|
| Retained | The lender deducts the interest for the expected term from the advance at the start. | No monthly payments are needed during the term, but less cash is released on day one. |
| Rolled up | Interest accrues each month and is repaid in full with the loan at the end. | The property produces no income during the term, such as a refurbishment. |
| Serviced | The borrower pays the interest monthly, as with a conventional loan. | The business or the property has income to cover the monthly cost. |
What a bridging loan costs
The cost of a bridge is more than the interest rate. Expect an arrangement fee charged by the lender, often a percentage of the loan, valuation fees, the lender's legal costs as well as your own, and in some cases an exit fee when the loan is repaid. Broker commission paid by lenders is disclosed on our regulation and fees page.
Bridging is more expensive than long-term borrowing, which is why it should be used for a defined period with a clear plan. Comparing offers on total cost over the realistic term, not just the headline monthly rate, gives a truer picture.
Bridging, development finance or a commercial mortgage?
| Product | Typical use | Repaid from |
|---|---|---|
| Bridging loan | Short-term purchase, auction, light refurbishment or chain break | A sale or a refinance at the end of the term |
| Development finance | Ground-up build or heavy refurbishment, released in stages | Sale of the finished units or a refinance |
| Commercial mortgage | Long-term ownership of trading premises or investment property | Trading profits or rental income over the term |
Who Bedrock arranges bridging for
Bedrock arranges commercial bridging for UK limited companies: developers, property investors and trading businesses buying or refinancing premises. We do not arrange bridging for individuals buying or refinancing their own home.