Glossary

Commercial bridging finance glossary

Bridging finance has its own vocabulary, and lenders, valuers and solicitors use it freely. This glossary explains 45 terms you are likely to meet on a commercial bridging loan, in plain English.

Arrangement fee: The lender's fee for setting up a bridging loan, typically around 1% to 2% of the loan and usually added to the loan or deducted from the advance. Our bridging loan fees guide explains it alongside every other charge.
Auction finance: Short-term finance used to complete a property bought at auction, where completion is typically due within 28 days of the hammer falling. See auction bridging finance.
Bridge to let: A bridging loan used to buy or improve a property and secure tenants, with the exit being a refinance onto a longer-term investment mortgage once the property is let. See commercial bridge to let.
Class E: The planning use class in England for commercial, business and service uses, covering uses such as shops, offices, cafes and restaurants, light industrial, gyms, clinics and nurseries. Changing between uses within Class E does not normally need planning permission.
Class MA: A permitted development right in England allowing change of use from Class E to residential (C3) through prior approval, where the building has been in Class E use for at least two continuous years. Read our Class MA guide and confirm details with a planning consultant.
Closed bridge: A bridging loan with a fixed repayment date linked to an exit that is already contracted, such as an exchanged sale. See open vs closed bridging loans.
Completion: The point at which the loan funds are released and, on a purchase, legal ownership passes to the buyer. On a bridge, completion follows a satisfactory valuation and the solicitors confirming the legal work is done.
Day-one LTV: The loan to value at the moment the loan completes, based on the current value of the property before any works or uplift. Lenders often cap the day-one LTV even when they lend against a higher future value.
Default interest: A higher rate of interest that applies if the borrower breaches the loan terms, most often by failing to repay at the end of the term. See bridging loan extensions and defaults.
Drawdown: The release of loan funds. A simple bridge has a single drawdown at completion, while a refurbishment bridge may release works funding in several drawdowns as stages are completed.
Dual representation: Where one firm of solicitors acts for both the borrower and the lender, which some lenders allow when there is no conflict of interest. It can save time and cost; see our guide to bridging loan solicitors.
Exit fee: A fee some lenders charge when the loan is repaid, usually calculated as a percentage of the loan or the redemption amount. Many bridging loans have no exit fee, so it is an important point of comparison.
Exit strategy: Your plan for repaying the bridging loan, usually a sale or a refinance onto longer-term finance. Lenders assess the exit as closely as the property; see bridging loan exit strategies.
First charge: The senior legal charge over a property, giving the lender first claim on sale proceeds ahead of any other secured lender. See first vs second charge bridging.
GDV: Gross development value: the expected value of a property once planned works or conversion are complete. Lenders use it to size loans that fund works.
Gross loan: The total amount borrowed, including any arrangement fee and retained interest added to the loan. Interest is normally charged on the gross figure, and the gross loan is what you repay.
Heavy refurbishment: Works that involve structural changes, planning permission or building regulations approval, such as reconfiguring floors or converting a building to a new use. See refurbishment bridging loans.
Indicative terms: An early, non-binding outline of what a lender is prepared to offer, covering loan amount, pricing structure, fees and conditions, sometimes set out as heads of terms. They are subject to valuation, legal work and underwriting.
Legal charge: The security a lender registers against a property title at HM Land Registry, giving it the right to enforce, for example by sale, if the loan is not repaid. Scotland uses a standard security instead.
Light refurbishment: Cosmetic or non-structural works, such as new kitchens, decoration, flooring or services, that do not need planning permission. See light vs heavy refurbishment.
LTGDV: Loan to gross development value: the total loan as a percentage of the expected value after works. Lenders use it alongside day-one LTV on refurbishment and conversion bridges.
LTV: Loan to value: the loan as a percentage of the property value. Commercial bridging is commonly available up to 70% to 75% LTV on a first charge for standard commercial property; see commercial bridging loan LTV.
Minimum term: The minimum number of months of interest a lender charges, even if the loan is repaid sooner. Check it alongside any refund terms on retained interest.
Monitoring surveyor: A surveyor appointed by the lender to check the progress, cost and quality of works before each stage of funding is released. Their fees are usually paid by the borrower.
Net loan: The cash actually released to you after fees and any retained interest have been deducted from the gross loan. Comparing net figures shows how much usable money each offer provides.
Open bridge: A bridging loan with no fixed repayment date, which can be repaid at any point within its maximum term once the planned exit completes. Most commercial bridges are open.
Open market value: A valuer's opinion of the price a property would achieve if sold on the open market with a normal marketing period. See commercial bridging valuation.
Permitted development: Development that can be carried out without a full planning application because a national permitted development right allows it, sometimes subject to prior approval. Rights can be removed locally, for example by an Article 4 direction.
Personal guarantee: A promise by an individual, usually a director, to repay a company's loan from their own assets if the company cannot. Take independent legal advice; see personal guarantees on bridging loans.
Prior approval: A process in which the local planning authority assesses specific matters, such as transport, contamination, flooding, noise or natural light, before certain permitted development can go ahead.
Redemption: Repaying the loan in full, including interest and any fees. The lender issues a redemption statement showing the exact amount due on a given date.
Regulated mortgage contract: A loan to an individual or trustees, secured on UK land, where at least 40% of the land is used or will be used as a dwelling by the borrower or a close family member. Such loans must be arranged by an FCA authorised firm; see regulated vs unregulated bridging.
Restricted sale value (90/180-day value): A valuer's opinion of the price a property would achieve if it had to be sold within a restricted period, commonly 90 or 180 days. Some lenders base their lending on this figure rather than open market value.
Retained interest: Interest for an agreed period that the lender deducts from the advance at completion, so no monthly payments are due. See retained vs rolled up interest.
Rolled-up interest: Interest added to the loan balance each month and repaid with the loan at the end, sometimes compounding. See how bridging loan interest is calculated.
SDLT: Stamp Duty Land Tax, paid on property purchases in England and Northern Ireland. Non-residential rates are 0% up to £150,000, 2% from £150,001 to £250,000 and 5% above £250,000; Wales uses Land Transaction Tax and Scotland LBTT. Take advice from your accountant.
Second charge: A legal charge ranking behind an existing first charge, so the second lender is repaid only after the first. It usually needs the first lender's consent; see second charge commercial bridging.
Semi-commercial: A building combining commercial and residential parts, such as a shop with flats above. If the borrower or family will live in it, the loan may be regulated; see semi-commercial bridging loans.
Serviced interest: Interest paid monthly by the borrower during the term, usually from rent or business income, so the balance does not grow.
SPV: Special purpose vehicle: a limited company set up solely to hold a property or project, often preferred by lenders. See bridging loans for limited companies.
Title insurance: An insurance policy covering specific title defects or missing searches, often used to speed up a transaction or where a seller gives limited information. It is common when buying from receivers.
TOGC: Transfer of a going concern: where a let property business is sold and, if the conditions are met, the sale can be treated as outside the scope of VAT. The rules are technical, so take advice from your accountant.
Unregulated bridging: Bridging finance secured on commercial or investment property for business purposes, outside the regulated mortgage contract definition. We arrange it directly; see unregulated bridging loans.
Valuation: A report by a RICS registered valuer, instructed by the lender, giving the property's value and often a restricted sale value and GDV. The lender relies on it to set the loan amount.
VAT bridging loan: A short loan that funds the VAT charged on a commercial property purchase, repaid when HMRC refunds the VAT. See VAT bridging loans.

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