BESPOKE / CREATIVE / FLEXIBLE
LARGE BRIDGING LOANS
A large bridging loan is a perfect solution for anyone who has a large project to fund and needs quick access to a substantial amount of money. This type of short-term financing can be used for a number of different business purposes.
To find out more about large bridging loans and what the process for securing one entails, don’t hesitate to reach out to our dedicated team of financial experts at any time.
What Counts as a Large Bridging Loan?
A bridging loan of over £1 million is what banks and other financial institutions that offer them would consider a large bridging loan. Those who apply for smaller bridging loans deal with a saturated market. However, those who venture into large bridging loan figures of over £1 million will get access to a variety of private banks and other specialized bridging lenders, which can significantly increase the number of options for the borrower.
How Large Bridging Loans Can Be Used
There really are no rules or limits regarding the ways in which a large bridging loan can be used. When an individual or company receives a large amount of money in a short timeframe, they are able to make quick financial decisions, usually large investments, without having to wait to earn or raise the needed funds on their own.
Large bridging loans are often used to purchase property via auctions, cover costs of large development projects, meet taxation requirements, renovation or restoration work, clear large debts, and more.
These loans are called bridging finance because they provide you with a way to bridge gaps in your finances.
Key Differences Between Large and Small Bridging Loans
The larger your bridging finance is, the more complex the process of applying for one will be. Lenders tend to increase the amount of due diligence required when they are preparing to loan millions of pounds.
When we are talking about large bridging loans, we are talking about a larger market and more choices, but also higher price sensitivity and increased complexity related to every aspect of the transaction.
How To Get a Large Bridging Loan
There is not much of a difference between the process of getting a small and large bridging finance. The biggest difference is in the value of the assets (usually property) that you are going to be using as collateral.
When it comes to large bridging finance, you will usually be able to borrow a sum of up to 80% of the value of the property that you are offering as security. However, not all lending institutions are the same and some might offer less or more than that.
Being able to present a clear exit plan that your potential lenders can be confident in is also essential for getting large bridging loans. Bridging lenders will need to be convinced that the exit strategy you have is a very solid one in order to offer you a short-term loan worth millions of pounds.
There is no real timeline that can be given by anyone involved in the process. The speed at which you will be able to qualify for and receive a bridging loan will depend on how prepared you are for the application process.
If all valuations have been completed and legal teams come prepared, then it’s not impossible to agree on a bridging loan in a couple of days. Getting a deal done faster will usually also end up costing the borrower more than submitting an application that isn’t very urgent in nature.
Whether or not a bridging loan is regulated will usually depend on the property that the bridging loan is secured against. If the property is a home that you currently live in or have lived in, then the bridging loan will usually be regulated.
If you are using a commercial property or a development site as security then the loan will usually not be regulated. However, this is a fairly complex area with many moving parts involved and circumstances that can be subject to various interpretations.
The lending criteria for a large bridging loan doesn’t vary much. The applicant must be 18 years of age and in most cases, you can qualify for any type of bridging loan even if your credit history is poor.
Generally, applying for bridging finance is a much more flexible and lenient process than a standard mortgage application. More than anything else, the success of your application will depend on the value of the security that you are offering.
Since bridge loans are short-term loans, lenders are more interested in the strength and potential value of your project and exit plan than they are in your credit score.
You can repay a bridging loan early and usually without incurring any type of penalty. However, if you are taking out bridging finance that was designed as a mortgage refinancing product, for example, then there might be early repayment charges included. Your lender will usually be sure to note these types of charges when putting together the offer. In the case of property developers that are selling property and anticipate that they will be able to make the sale before reaching the deadline for paying back the bridging loan, they should make sure that they are working with a lender that offers early repayment options.
Whether your bridging loan will have a fixed or variable interest rate will depend on your lender. A fixed insurance rate means that the rate doesn’t change across the term of the bridge loan. Typical interest rates for bridging loans range from around 0.4% to 2%. However, since they do not last long and are only taken out for a few months before being paid back usually, the lender will charge monthly interest rates instead of annual percentage rates, as banks and other lenders on the finance market usually do for long-term mortgages and other types of loans that can last years.
Most lenders will not require any proof of income or employment for a bridge loan since there are usually no monthly interest payments required. Since you will have to pay back the bridge loan in a lump sum at the end, there is no need to prove to the lender that the loan is affordable by income that is being earned monthly.
Typical Application Process
These are the most common steps that you can expect to take on the path to qualifying for a large bridging loan:
1. Initial talks
Start the process with a conversation between you are your broker of choice in order to go over the details of the plan before physically applying for the loan. In this first step, brokers will want to understand what you want to fund with the bridging loan and how you plan on paying the loan back. Be sure to ask any questions about the actual application process at this time in order to avoid unpleasant surprises down the road.
2. Acceptance of loan
If you have convinced the broker that your plan is a solid one and the broker believes that you have a good chance of getting a large bridging loan, they will then engage lenders on your behalf and start negotiating a deal for you. You will receive a conditional offer based on the value of the property being used as security.
3. Valuation of property
Lenders need to have a property valuation performed in order to see if the property that you are using as security will provide sufficient collateral for the loan amount that you are interested in receiving. The valuation is performed by a professional value; usually one that the lender is familiar with and has worked with in the past.
You will need to provide documentation that will help convince the lender that your exit strategy is an achievable one and that you will have no issues with repaying the bridging finance. Bank statements and credit checks are sometimes required in this phase, but as already stated, lenders are rarely turned off by a poor credit history as long as the exit strategy is satisfactory.
5. Receival of offer
After the paperwork, which includes the official performed property valuation, is submitted to the lender, you will receive a formal offer. This letter of acceptance for your bridging finance will usually come with a legal pack that will be given to your solicitor.
6. Receival of funding
You will gain access to your funds after receiving the formal letter and completing all of the necessary legal work. The loan is usually first sent to your solicitor, who then transfers the money to the party with whom you are doing business. However, when large bridging loans in question, the money might be directly deposited into your company’s bank account in order to avoid unnecessary transfer fees for such large sums of money.
Obviously, the biggest cost you will encounter when receiving a large bridging loan is the interest you will have to pay on the loan when returning the money.
However, there are some other fees that you can expect to encounter throughout the process including arrangement fees, surveyor fees, value fees, and various legal fees.