If time is the paramount focus of your need, often traditional lenders move at a much slower pace than you may need. Thus, a small bridging loan could be a potential lifesaver. Whilst not glamorous, and certainly not the cheapest option out there, small bridging facilities 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 rather than a long-term route.
These options are typically secured against property, with lending figures tending to range from £10,000 to a maximum of about £250,000. Unlike standard mortgages, bridging loans are substantially faster to arrange, often in days rather than weeks or months. Here at Goldhill Finance, we can sign off your bridging loan application within 24 hours and approved the funds to be with you in as little as 48 hours.
Be aware – these are interest-heavy, short-term, and built for speed, not comfort. So as long as you take that into account, you’re good to go.
How can I use them?
One of the reasons small bridging is so popular is the flexibility they allow. They’re not tied to a single purpose only, and lenders tend to be more open-minded than other institutions such as banks when it comes to approving the need for the cash. Common uses include:
1. Breaking property chain hassles
If a property sale collapses and you’ve already committed to buying another, a bridging loan can keep the move alive while you sort out the mess and make sure the chain doesn’t 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 cashflow 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
In urgent or stressful circumstances, your chosen bridging lender can move quickly enough to stop the property from being repossessed, clear tax bills or address other pressing financial matters.
6. Going through with commercial property purchases
If you spot a retail unit, office space, warehouse or industrial building and want to snap it up before someone else does, commercial bridging finance lets you complete the deal quicker, and can be done in days rather than weeks. Then you can refinance into a long-term commercial mortgage after that.
7. Downsizing or upsizing your home
You have eyed up your next home but haven’t sold your current one yet. A bridging loan gives you time to complete your sale without losing out on the property you truly want.
What is the length I can take one for?
These loan type 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 – don’t treat them as anything other than that
Making the payment back
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 you’re exist is not considered viable and realistic to satisfy their needs, you won’t get approved. Lenders are extremely stringent with this.
What is a ‘mini’ bridge?
A small bridging loan and a mini bridging loan generally refer to the same type of finance. Both are informal terms used to describe short-term bridging loans for lower loan amounts compared to standard bridging finance. There is no official or legal difference between the two, and the wording is often just a marketing preference used by lenders or brokers. What matters most are the loan terms, such as the amount, interest rate, duration, and exit strategy, rather than the name used.
The advantages broken down
- Speed: Bridge lenders can turn things around in just a number of days.
- Flexibility: Less restrictions on how funds will be used once granted.
- Short-term: No long-term tie-in and commitments.
- Alternative: Ideal for projects that may not be deemed as acceptable to a bank to lend on.
The most suitable candidates to apply
If you fall into the below options, you have a good chance of getting your application signed-off:
- Property buyers trying to get out of or avoid chain bottlenecks
- Investors who are looking to flip for profit
- Auction sale deadlines needing to be stuck to
- Businesses needing a short-term boost to their cash reserves
Remember – it’s all about convenience and short-term, if you want something ‘cheap’ this is not the right option for you.
Closing considerations
A small bridging loan isn’t something to be taken lightly. It’s a specialist financial tool designed for very specific uses. If used correctly, it can grant you the movement to go ahead with opportunities that would otherwise be unobtainable. When used without thought, you can set yourself up for a costly headache.
Make sure your case is strong, the exit route is well thought out and that you have taken the costs into account beforehand. As with anything in the world of money lending, don’t rush and just sign – study, compare and be sure you know what you are getting yourself into.