What is a Business Bridging Loan?

Written by James Dutton

What is a business bridging loan?

Timing doesn't always line up neatly in business. A property purchase might need to complete before funds from a sale come through, or an acquisition opportunity might arise faster than a longer-term facility can be arranged. A business bridging loan exists to cover exactly this kind of gap, providing short-term funding to bridge the period between one financial event and the next.

How does a business bridging loan work?

A bridging loan is typically secured against an asset, most often property, with the lender advancing a percentage of that asset's value, commonly referred to as the loan-to-value ratio. Because the loan is intended to be short, it's generally repaid either through the proceeds of a sale, refinancing onto a longer-term facility, or another agreed source of funds once those become available.

Bridging finance tends to fall into one of two structures:

Open bridging loan: no fixed repayment date is set, though lenders will usually still expect the loan to be cleared within a set maximum period.

Closed bridging loan: a fixed repayment date is agreed in advance, generally used where the source of repayment, such as a property sale, is already confirmed.

What can a business bridging loan be used for?

Bridging finance can support a range of short-term funding needs, including:

• Completing a property purchase ahead of a sale being finalised
• Funding a business acquisition where speed is a factor
• Covering a deposit while longer-term finance is arranged
• Purchasing stock or materials ahead of a busy period
• Providing working capital during a period of transition

How much can a business borrow, and over what term?

Bridging loans are typically available from £25,000, with some lenders able to arrange considerably larger facilities depending on the asset offered as security. Terms are generally short, often ranging from a few months up to around 18 months, reflecting the temporary nature of the funding.

Because pricing and terms vary between funders, the exact amount available, and the cost of borrowing it, will depend on the asset involved, the loan-to-value ratio, and the strength of the business's exit route.

What do lenders look for?

Given the short-term and often time-sensitive nature of bridging finance, lenders will generally want to see:

• A suitable asset to offer as security
• A clear and credible plan for how the loan will be repaid, often referred to as the exit strategy
• Confirmation of the asset's value, typically via valuation
• Evidence supporting the timeline for the exit, such as a sale agreed or refinancing in progress

Benefits of a business bridging loan

• Access to funding on a faster timescale than many longer-term facilities
• Can be arranged even where a business's circumstances fall outside standard lending criteria
• Flexible use of funds across property, acquisitions or working capital needs
• Often available without early repayment penalties

Things to consider with a business bridging loan

Cost: interest rates and associated fees tend to be higher than standard business finance, reflecting the short-term and often higher-risk nature of the lending.

Exit strategy: because the loan is short-term by design, a credible plan for repayment needs to be in place before funds are drawn.

Security: most bridging loans require an asset to be offered as collateral, which is then at risk if the loan can't be repaid as planned.

Timeframe: bridging finance isn't intended as a long-term solution, so it tends to suit specific, time-limited funding gaps rather than ongoing needs.

What other finance options are worth considering?

Where a bridging loan isn't the right fit, other routes may be worth exploring:

Commercial mortgage: suited to longer-term property finance rather than a short-term gap.

Unsecured business loan: provides a lump sum based on the business's creditworthiness, without requiring a specific asset as security.

Invoice finance: releases cash tied up in unpaid invoices, which may suit a shorter-term cash flow gap where a specific asset isn't available to secure against.

Why use a finance broker for a bridging loan?

Bridging finance is a specialist area, with pricing, loan-to-value limits and appetite varying significantly across the lender market. A broker with access to a wide panel can help identify funders suited to the asset and timescale involved, which can matter considerably given how time-sensitive bridging finance often needs to be.

MAF Finance Group can compare offerings from a wide range of banks and alternative funders to help structure bridging finance around your circumstances.

To learn more or get a quote, fill out the form below. If you'd like to speak to someone directly, call us on 0115 858 1010 and a member of our team will be happy to help.