Getting a small bridging loan may not the cheapest option, but it can be a lifesaver when you need the funds fast. Small bridging facilities generally range from £10,000 to £50,000 and exist for one purpose: to get you from A to B when the clock is standing in your way.
What describes a small bridging loan?
Any ‘smaller’ amount short-term funding option that is serving the purpose of “bridging” a gap until a longer-term option is ready – this is the essence of a small bridging loan. Think of it as a temporary stop-gap instead of a long-term option.
A bridging loan, whether small or large, is typically secured against property, with lending figures typically ranging from £10,000 to £50,000. Unlike a standard mortgage, bridging loans are much faster to arrange, often in days rather than the weeks or months you can wait with standard mortgages from a bank. As a direct lender, we can sign off your bridging loan application within 24 hours and transfer the funds in as little as 48 hours.
Examples of small bridging loans
Below are some examples of small bridging loans that we offer:
£10K loan
A £10k bridging loan can provide you funds needed to cover home repairs, auction costs or for business capital.
Purchase Price (Security Property): £60,000
Loan Requested: £10,000
Term: 2 months
Net LTV: 17%
- Interest Rate: 1.45% per month
- Monthly Interest: £10,000 × 1.45% = £145
- Total Interest (2 months): £145 × 2 = £290
- Lender Arrangement Fee (1%): £10,000 × 1% = £100
Summary:
Loan Amount: £10,000
Arrangement Fee: £100
Total Interest: £290
Total to Repay: £10,000 + £100 + £290 = £10,390
£25K loan
A £25k bridge loan can provide fast cash access to meet unexpected tax or other business costs.
Purchase Price (Security Property): £110,000
Loan Requested: £25,000
Term: 5 months
Net LTV: 23%
- Interest Rate: 1.25% per month
- Monthly Interest: £25,000 × 1.25% = £312.50
- Total Interest (5 months): £312.50 × 5 = £1,562.50
- Lender Arrangement Fee (1%): £25,000 × 1% = £250
Summary:
Loan Amount: £25,000
Arrangement Fee: £250
Total Interest: £1,562.50
Total to Repay: £25,000 + £250 + £1,562.50 = £26,812.50
£35K loan
A £35k bridge offers short-term funding for urgent purchases or any minor development, refurbishment work or for business capital.
Purchase Price (Security Property): £50,000
Loan Requested: £35,000
Term: 4 months
Net LTV: 70%
- Interest Rate: 1.80% per month
- Monthly Interest: £35,000 × 1.80% = £630
- Total Interest (4 months): £630 × 4 = £2,520
- Lender Arrangement Fee (1%): £35,000 × 1% = £350
Summary:
Loan Amount: £35,000
Arrangement Fee: £350
Total Interest: £2,520
Total to Repay: £35,000 + £350 + £2,520 = £37,870
£50K loan
A £50k bridging finance can close the gap between selling your current property and buying a new so you don’t miss out.
Purchase Price (Security Property): £90,000
Loan Requested: £50,000
Term: 9 months
Net LTV: 55%
- Interest Rate: 1.5% per month
- Monthly Interest: £50,000 × 1.5% = £750
- Total Interest (9 months): £750 × 9 = £6,750
- Lender Arrangement Fee (1%): £50,000 × 1% = £500
Summary:
Loan Amount: £50,000
Arrangement Fee: £500
Total Interest: £6,750
Total to Repay: £50,000 + £500 + £6,750 = £57,250
How can I use small bridging finance?
One of the reasons small bridging is so popular is the flexibility they allow. They’re not tied to a single purpose only, and as a lender we tend to be more open-minded than other institutions such as banks when it comes to approvals.
Some common uses of a small bridging loan include:
1. Breaking property chain issues
If a property sale collapses and you have already committed to buying another, taking out a bridging loan can help you to keep progress while you sort out issues and make sure the chain doe not fall through.
2. Auction purchases
Auction sales demand quick completion, usually within 28 days on properties. Traditional lenders aren’t able to move that fast, so a bridging loan steps in to sort out the funding to get it over the line.
3. Renovating or upgrading property condition
Often a property may be sought after where it may be classed as ‘unmortgageable’ in its current condition: If it has no kitchen, no bathroom, structural issues, bridging finance can be used to cover renovation costs until the property reaches the necessary condition on which to get a long-term mortgage placed on to it.
4. Improving cash flow issues for your company
Companies often need emergency funding while waiting for other finance, invoices or asset sales to finalise. A temporary bridging loan can plug that gap. Think of it as a short term business loan.
5. Avoiding threat of repossession or paying off urgent bills
If you are in an urgent or stressful circumstance, a bridging lender can move quickly enough to stop a property you own from being repossessed, clear tax bills or address any other pressing financial matters.
6. Going through with commercial property purchases
If you spot a retail unit, office space, a warehouse or an industrial building you think would be perfect for your business and want to snap it up before someone else does, a commercial bridge loan gives you the option to complete the deal quicker. All you have to do after is refinance into a long-term commercial mortgage thereafter.
7. Downsizing or upsizing your home
You have found your next home but haven’t sold your current one yet. A bridging loan gives you time to complete the sale of your current home without losing out on the property that you want.
What is the length I can take one for?
Small bridging loans are meant to be for short-term only, often from a few weeks to 1 year. Different lenders could offer slightly longer terms, but the key point is that they’re temporary to ‘bridge the gap’.
Bridging Loan Repayments
Bridging lenders need to be confident in your exit strategy – this being how you intend to pay them back. They will often be open to the following:
- Selling the property that the loan is secured against
- Moving over to a standard mortgage or commercial loan
- Using a business transaction or asset sale to come up with the money to pay it off
If your exit is not considered viable you will not be approved. Lenders are extremely stringent with this.
What is a ‘mini’ bridge?
A mini bridging loan refers to low amount bridging loans. There is no official or legal difference between ‘small’ and ‘mini’ bridge loans.
The advantages broken down
- Speed: Bridge lenders can turn things around in just a number of days.
- Flexibility: Less restriction on how funds will be used once granted.
- Short-term: No long-term contract and commitments.
- Alternative: Ideal for projects that may not be deemed as acceptable to a bank.
The most suitable candidates to apply
If you fall into the below options, you have a good chance of getting approved:
- Property buyers trying to get out of or avoid chain bottlenecks
- Investors to flip property for profit
- Auction sale deadlines
- Businesses needing a short-term cash injection
Closing considerations
A small bridging loan isn’t something to be taken lightly. It’s a specialist financial product designed for very specific uses. If used correctly, it can grant you the flexibility to go ahead with opportunities that would otherwise be unobtainable.
Ensure your case is strong, the exit route is well thought out and that you have taken the costs into account beforehand.
