Auction bridging finance to complete commercial lots on time
Auction bridging finance is a short-term loan, secured on the lot you have bought, that lets you complete a commercial property purchase within the auction deadline, which is typically 28 days from the fall of the hammer. When the gavel falls, contracts are exchanged and you have paid a deposit, typically 10%, so failing to complete is expensive.
This page is about commercial lots: shops, offices, industrial units, mixed-use buildings, pubs and land. We explain what to do before you bid, how lenders handle valuation and legal work against the clock, and what can go wrong. We arrange auction bridging loans through a wide panel of bridging lenders, and we would much rather speak to you before the auction than the day after.
Key takeaways
Auction bridging finance lets you complete a commercial lot within the usual 28-day deadline.
Get the legal pack reviewed and terms in principle in place before you bid.
Lenders usually lend against the lower of price and valuation, so a down-valuation means more cash from you.
Failing to complete can cost you your deposit, typically 10%, and more.
A clear, evidenced exit is what makes an auction bridge work.
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Why do commercial auction buyers use bridging finance?
A commercial mortgage can take many weeks to arrange: full underwriting, a bank valuation, credit committee and lengthy legal work. An auction contract will not wait. Bridging lenders are set up for short deadlines because they lend mainly on the property and the exit.
Auction lots also tend to be the kind of property mainstream lenders avoid: vacant shops, tired offices, buildings with short or no leases, unusual titles and properties needing work. A bridge lets you buy now, sort out the issue that put the lot at auction, then refinance or sell. If the plan is to let a vacant unit and move onto a term loan, see commercial bridge to let. If the lot needs works, see refurbishment bridging loans.
What should you do before bidding on a commercial lot?
Most auction problems are created before the bidding starts. Our checklist for commercial buyers:
Get the legal pack early and send it to a solicitor who acts on commercial auction purchases. Ask them to flag anything a lender will dislike.
Speak to us for terms in principle. We can obtain an indication of LTV, fees and conditions from lenders who are comfortable with the asset type and the timescale.
Check the special conditions for the completion date, buyer's premium, seller's costs you must reimburse and any arrears or service charge obligations.
View the property or have a surveyor do so. Lots are sold as seen.
Know your maximum bid based on the lender's likely valuation, not the guide price.
Have the deposit and fees ready in cleared funds, and know where your share of the purchase price is coming from.
What in the legal pack worries commercial lenders?
Commercial legal packs are often thinner than residential ones, and some issues can stop a lender lending at all. Look out for:
Issue
Why it matters to a lender
Short leasehold or onerous ground rent
Reduces value and saleability
Missing or defective title
The charge may not be enforceable without indemnity insurance or rectification
Tenancies without proper documentation
Income cannot be valued with confidence
Leases granted with security of tenure
Affects vacant possession value and redevelopment plans
Rights of way, restrictive covenants
Can limit use or development potential
Planning or building regulation gaps
May affect the lawful use and the exit
Sale by receivers or administrators
Limited warranties and replies to enquiries
Lots sold by receivers or insolvency practitioners have their own considerations, covered on bridging to buy from receivers.
Have a deal in front of you?Send us the property and the numbers. We will tell you quickly whether it is fundable.
How quickly can an auction bridging loan complete?
Where you have terms agreed before the auction, instruct the lender immediately afterwards and the valuation and legal work move quickly, auction bridging can complete well inside the 28-day window. Starting after the hammer is possible but leaves little room for anything to go wrong.
The usual sequence after a successful bid is:
Day 1 to 3: application submitted, valuation instructed, solicitors instructed on both sides.
Week 1 to 2: valuation inspection and report; lender's solicitor reviews the legal pack and raises enquiries.
Week 2 to 3: formal offer, certificate of title or report on title, signing of loan documents.
Before the deadline: funds released to your solicitor and the purchase completed.
Valuer availability, slow replies from the seller's solicitor and late identity documents are the most common causes of delay. Our page on fast commercial bridging loans explains what you can do to keep things moving.
How much can you borrow against an auction lot?
Lenders lend against the lower of the purchase price and the valuation in most cases. On standard commercial lots, LTV is commonly up to 70% to 75% on a first charge. Land, specialist buildings and lots in poor condition will see lower LTVs.
Remember that auction purchases come with extra costs on top of the price: the buyer's premium, the seller's costs listed in the special conditions, stamp duty, and both sets of legal fees. In England and Northern Ireland, non-residential SDLT is charged at 0% up to £150,000, 2% from £150,001 to £250,000 and 5% above £250,000. Wales has Land Transaction Tax and Scotland has LBTT.
If you need to borrow more than the lot alone supports, some lenders will take a charge over another property you own as additional security. Use the LTV calculator to test the numbers.
Is bridging finance a good idea for an auction purchase?
It can be, if three things line up: you have done the legal and physical due diligence, you have terms in place before you bid, and you have a realistic exit. Bridging is a sensible way to secure a property you could not otherwise complete on in time.
It is a poor idea when the bid is driven by excitement rather than numbers, when the exit depends on a planning consent you have not yet tested, or when you would struggle if the refinance took longer than expected. The cost of a bridge is manageable over a planned term; it becomes painful when a term runs out without an exit.
What are the downsides and risks of an auction bridge?
Be clear on the risks before you raise your paddle:
Losing the deposit. If you fail to complete, you are in breach of contract. The seller can keep your deposit and may claim further losses.
Down-valuation. If the valuer reports below the hammer price, the loan is reduced and you need more cash.
Cost. Monthly interest and fees are higher than on a term loan. Retained interest also reduces the net advance.
Exit risk. If the refinance or sale slips, extensions cost money and default interest can apply.
Hidden costs. Arrears, service charges and seller's costs in the special conditions can be significant.
What are the alternatives if a bridge is not right?
Cash buyers can complete without finance and refinance afterwards. Some buyers bring in a joint venture partner for the equity. Others look for lots sold with longer completion periods or under modern method of auction terms, which allow more time. A commercial mortgage can occasionally be arranged within an auction timescale for a well-let, straightforward property, but it is not something to rely on. See our guide to alternatives to bridging loans.
Unregulated commercial and investment bridging is arranged directly. Any case where the security includes a home you or an immediate family member occupies, including a flat above commercial premises, may be regulated and is introduced to a firm directly authorised by the Financial Conduct Authority. We are not directly authorised by the Financial Conduct Authority ourselves. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
How much would a 200k bridging loan cost for an auction purchase?
The cost depends on the LTV, the lot, the term and the interest method. You would pay monthly interest for the time the loan runs, an arrangement fee of around 1% to 2%, which is £2,000 to £4,000 on £200,000 for example, plus valuation and legal fees and possibly an exit fee. Our bridging cost calculator lets you test your own numbers.
What does Martin Lewis say about bridging loans?
We cannot speak for Martin Lewis or MoneySavingExpert, and their guidance is generally aimed at homeowners rather than commercial auction buyers. Our view is that bridging is short-term, relatively expensive finance that works when you have done your due diligence and have a clear exit, and becomes expensive when the exit slips. Treat it as a defined, planned step.
Is bridging finance a good idea for buying at auction?
It is often the only practical way to complete a commercial auction purchase within the deadline if you are not a cash buyer. It is a good idea when you have reviewed the legal pack, have terms in principle before bidding and have a realistic exit such as a refinance once the property is let. Without those, the risks rise quickly.
What are the downsides of a bridging loan at auction?
The main downsides are cost, the risk of a down-valuation reducing the loan, and the risk of losing your deposit if you cannot complete on time. There is also exit risk: if the refinance or sale takes longer than planned, extensions and default interest add cost. Hidden costs in the special conditions can also catch buyers out.
Can you get bridging finance after winning the auction?
Yes, but it leaves less time for valuation and legal work and less room to deal with problems. Contact us straight away and send the legal pack. Where the property is straightforward and everyone moves quickly, completion within the deadline is achievable, but arranging terms before the auction is much safer.
Do auction bridging lenders check my credit history?
Yes. Lenders run credit and identity checks on the borrower and any guarantors, alongside anti-money laundering checks on the source of your deposit and other funds. Adverse credit does not always rule you out, because the property and exit carry more weight, but disclose it early so we approach lenders who will consider it.
