What is a commercial bridging loan? A plain-English guide

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What is a commercial bridging loan and how does it work?

A bridge is a secured, interest-only loan with a short term. The lender takes a legal charge over the property, advances the funds on completion and expects one repayment at the end, usually from the sale of the property or a refinance onto a longer-term commercial mortgage.

Because the term is short, the lender focuses on three things more than a bank would:

• The property: its open market value, what it would sell for in a shorter period, and how easy it is to sell.
• The exit strategy: how, and when, the loan will be repaid.
• The borrower: experience, credit history, and whether the plan is realistic.

Interest is quoted monthly. It is usually retained (deducted up front for the term), rolled up (added to the balance and paid at the end) or serviced (paid each month). Our guide to retained vs rolled-up interest shows how each option changes the net amount you receive.

The typical journey, step by step

1. You share the property, the price or value, the loan you need and your exit.
2. We approach suitable lenders and return indicative terms.
3. The lender issues terms, you pay for a valuation and instruct a solicitor.
4. The RICS valuation and legal due diligence complete.
5. Funds are released on completion, and the term starts.
6. You repay the loan in full when the exit happens.

How is a commercial bridge different from residential bridging and a commercial mortgage?

Part of answering what is a commercial bridging loan is knowing what it is not. Commercial bridging sits between two products people know better. It is secured on commercial property (offices, shops, industrial units, mixed-use buildings, land and trading assets) rather than a home, and it is built for months rather than years.

Feature	Commercial bridging loan	Residential bridging loan	Commercial mortgage
Security	Commercial or investment property	Residential property, often the borrower's home	Commercial property
Term	1 to 24 months	Usually up to 12 months	Commonly several years and longer
Main focus of underwriting	Property value and exit	Property value, exit and affordability	Rental income or trading profit
Speed	Can complete in weeks where valuation and legal work move quickly	Weeks	Usually longer, with fuller underwriting
Regulation	Unregulated where for business purposes and no one lives in it	Often regulated	Usually unregulated
Pricing	Priced per month, higher overall cost	Priced per month	Priced annually, lower overall cost

The practical message: a bridge buys time and flexibility, and a mortgage is cheaper once the property is stable. Many borrowers use both, one after the other. Our full comparison of commercial bridging vs a commercial mortgage covers when each fits.

What is short-term commercial finance used for?

Commercial bridging is used when timing, the condition of the property or the circumstances of the deal rule out a mortgage for now. The common uses we see are:

• Auction purchases that must complete within a deadline, typically 28 days. See auction bridging finance.
• Refurbishment of a tired building before letting or selling it, covered on our refurbishment bridging loans page.
• Vacant or under-let property that a mortgage lender will not accept until tenants are in place.
• Planning gain: buying a site or building, obtaining planning permission or a change of use, then selling or refinancing.
• Buying business premises quickly before a long-term owner-occupier mortgage is in place.
• Raising capital against an existing commercial property for another purchase or a business need.
• Business chain breaks, such as buying new premises before the sale of the old ones completes. Residential chain breaks involving your own home are regulated, and we introduce those to a firm directly authorised by the Financial Conduct Authority.

So, in practice, what is a commercial bridging loan for? In each case, the bridge is a means to an end. The end is the exit, and lenders judge the case on how believable that exit is.

Which properties can secure commercial bridging?

Most types of commercial and investment property can be used as security, although lender appetite and LTV vary by asset. Standard property that is easy to value and sell attracts more lenders and better terms than specialist trading assets.

• Offices, shops and retail parades
• Industrial units and warehouses
• Mixed-use and semi-commercial buildings
• HMOs and student accommodation
• Hotels, pubs, restaurants and care homes, which are valued partly on trading
• Land, with or without planning, usually at lower LTVs

Specialist assets such as hotels and care homes are often valued on their trading potential, which means fewer lenders, more questions and lower leverage. That is where using a broker with a wide panel tends to matter most.

Who qualifies for a bridging loan?

Commercial bridging is open to individuals, limited companies (including SPVs), LLPs, partnerships, trusts and some overseas companies. Lenders do not apply fixed income multiples the way a mortgage lender would. Instead, they ask whether the deal makes sense.

• Sufficient equity: a deposit or existing equity, as most lenders cap the loan at a percentage of value.
• A credible exit: evidence that a sale or refinance can happen within the term.
• Suitable security: a property that a valuer can value and a lender can sell if needed.
• Relevant experience for heavier projects, such as conversions.
• An explainable credit history: adverse credit does not always rule you out, but it must be disclosed.

Company borrowers are usually asked for personal guarantees from directors. Take independent legal advice from your solicitor before signing one.

What does commercial bridging cost?

Bridging is priced per month and is more expensive than long-term debt, so total cost depends heavily on how long you keep the loan. The costs to budget for are:

Cost	How it usually works
Monthly interest	A monthly rate on the loan, retained, rolled up or serviced
Arrangement fee	Typically around 1% to 2% of the loan, often added to it
Valuation fee	Paid up front, scaled to the property's value and complexity
Legal fees	Your solicitor plus the lender's solicitor, both paid by you
Exit fee	Charged by some lenders on repayment, not all
Broker fee	Agreed with you in writing before you proceed

For example, on an illustrative £200,000 bridge an arrangement fee of 1% to 2% would be £2,000 to £4,000, before interest, valuation and legal costs. Interest is usually the largest single cost, so a nine-month bridge costs materially less than a twelve-month one. Use our bridging cost calculator to model your own figures, and see bridging loan fees explained for each charge in detail.

What are the downsides of a bridging loan?

Bridging is a useful tool, but it carries real risks and you should go in with your eyes open.

• Cost: monthly pricing and fees make it expensive if held longer than planned.
• Exit risk: if the sale or refinance is delayed, you may face extension fees, default interest or, in the worst case, enforcement.
• Valuation risk: a down-valuation can reduce the loan and leave a funding gap.
• Security: the lender has a charge over the property and may take personal guarantees.
• Upfront costs: valuation and legal fees are usually paid whether or not the loan completes.

The best protection is a realistic plan. Build in time for slippage, choose a term with headroom, and read our guide to bridging loan exit strategies before you apply.

Is commercial bridging regulated?

Bridging secured on commercial or investment property for business purposes is unregulated, and we arrange it directly. If the security includes a home that you or an immediate family member occupies or will occupy, such as a flat above your shop, the loan may be a regulated mortgage contract. We introduce those cases to a firm directly authorised by the Financial Conduct Authority, so the right checks are made.

We are not directly authorised by the Financial Conduct Authority. Our guide to regulated vs unregulated bridging explains where the line falls, which matters most on semi-commercial and mixed-use property.

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.