Is It Difficult To Get A Bridging Loan?

Getting a bridging loan isn’t difficult if you are organised and have the necessary documents available.

When it comes to securing one, bridging lenders will want to ensure you are a reliable partner, have a solid exit strategy and understand the nuances involved in bridging. Here, we look at what’s involved in securing a bridging loan, what the potential hurdles may be and how to navigate the process smoothly.

What Is A Bridging Loan?

A bridging loan is a short-term loan that provides very quick access to large sums of money.

These loans are secured against a valuable asset (property) and are usually repaid within 12 months. They exist to help buyers purchase property whilst they are waiting for the sale of another asset.

Usually when applying for a bridging loan, lenders will want to understand your ‘exit strategy’. This refers to the action which will allow you to pay off the loan in full. If that involves selling a property, they will want to look at the property market landscape, the state of the property and any other considerations for the sale.

For information around how much you can borrow, see our guide around How Much Can I Borrow With A Bridging Loan?

What Are The Main Types Of Bridging Loans?

There are two main types of bridging loans:

1. Open Bridging Loans: These have no fixed repayment date but are generally expected to be repaid within 12 to 24 months. They are more flexible but can also come with higher interest rates.
2. Closed Bridging Loans: These have a set repayment date, usually aligned with a confirmed sale of an existing property. They are typically approved with lower interest rates because the lender is taking on less risk.

Bridging loans are further categorised into first charge and second charge loans.

If the borrower owns the asset outright (i.e., no mortgage), a lender takes a ‘first charge,’ meaning they will be the first person to be repaid if the lender defaults on the loan.

If the asset still has a mortgage, the bridging loan becomes a ‘second charge,’ meaning the bank or building society is paid first. This is a riskier position for the lender, so may stand in the way of approval if a solid exit plan isn’t presented.

Is Getting A Bridging Loan Hard?

Getting a bridging loan is not necessarily difficult, but it does usually follow a process that borrowers should be aware of.

Here are some elements that can affect the process:

1. Lender Criteria: Different lenders have different criteria for approving bridging loans. While some might require a high level of equity in your current property, others may focus on your credit history and financial stability. If you have a strong financial profile and enough equity, getting approval is generally relatively easy. However, if you have a more complex financial history or limited equity, the process could be more difficult.
2. Proof Of A Viable Exit Strategy: Lenders want to see a clear exit plan outlining how the borrower is planning to repay the loan. Common exit strategies may include things like selling the property, refinancing or selling other assets. A well-thought-out exit strategy can have a big impact when it comes to loan approval.
3. Legal Documents and Valuations: Lenders often want to see a property valuation and legal checks to make sure that everything is in order. These steps can add time to the application process, so make sure you have all the documents ready upfront to avoid any delays.
4. Market Conditions: Broader market conditions can also have an impact on the ease of getting a bridging loan. For example, if the property market is in flux, lenders may be more cautious.

How Long Does It Take To Get A Bridging Loan?

One of the biggest appeals of bridging loans is how quickly they can be arranged.

This can be a huge benefit to investors or developers looking to find capital fast. Typically, if the process goes well, bridging loans can be approved and funded within days or weeks.

At Blue Square Capital for example, applications can be completed within days, assuming all documents are in order.

What Can Slow Down The Process Of Securing A Bridging Loan?

There are a number of factors can slow down a bridging loan application:

• Incomplete Documentation: Inaccurate or incomplete paperwork is one of the most common reasons for a delay. Making sure that all documents are accounted for and submitted quickly can help speed up the process.
• Complex Credit Histories: Borrowers with bad credit may have to provide other documents, making the process longer.
• Surveying and Valuations: Properties that are located in remote or difficult-to-access areas might need more time for surveying, potentially slowing down the application.

However, making sure you have all the documents you need before applying will ensure that the process is completed quickly and efficiently.

How To Improve Your Chances Of Approval For A Bridging Loan

Here are some steps you can take to improve your chances of securing a bridging loan:

Prepare A Solid Exit Strategy: The clearer your plan to repay the loan, the more comfortable a lender will feel when approving it. Whether you plan to sell a property, refinance or use savings, make sure that your strategy is realistic and presented as fool-proof.

Organise Your Paperwork: Have all your financial documents, property details and legal information ready when you apply. This includes proof of income, property valuations, existing mortgage details, and a copy of the sale contract for any properties involved. Having these ready and to hand will ensure the process is as quick as possible.

Choose The Right Lender: Working with a reputable lender known for processing bridging loans quickly and efficiently can make a big difference. At Blue Square Capital, we specialise in fast and flexible bridging loans, making sure you get the funding you need without unnecessary delays.

Maintain Good Communication: Keeping in touch with your lender or bridging loan broker and responding quickly to any queries can prevent delays.

Why You Should Contact Blue Square Capital For Your Bridging Needs

At Blue Square Capital, we understand that time is of the essence when it comes to property transactions.

That’s why we offer fast and flexible bridging loan solutions that can be suited to your needs. With our process, you can expect:

• Quick Decisions: We provide indicative terms within 24 hours and can often complete the entire process within a couple of weeks.
• Competitive Rates: Our bridging loans are competitively priced, ensuring you get the best value for your money.
• Expert Guidance: Our team of experienced professionals is here to guide you through every step, making sure you have a smooth and hassle-free experience.
• Flexible Options: Whether you need an open or closed bridging loan, a first charge or second charge loan, we have options that can be customised to suit your project’s needs.

Don’t let financing delays hold your project back. Contact us today for a free consultation, and let us help you bridge the gap with confidence.