Navigating commercial real estate: the role of bridging loans

In May 2024, the Bank of England agreed to keep the current bank rate (which plays a big role in commercial real estate interest rates) at 5.25%, in the hopes of reducing inflation down to 2%.

This move seems to be working – in June 2023, UK inflation rates were at 7.9%, but by April 2024, they stood at 2.3%. This number represented an almost 1% reduction on the previous month as in March 2024 interest rates stood at 3.2%. 

A little further afield, the EU just cut their interest rates down from 4% to 3.75%. It’s not unusual for cross-border decision making to influence UK sentiment.

All to say, some believe the future will be a little brighter for real estate. In fact, according to Statista, the global commercial real estate market is expected to expand by an annual rate of 2.96% over the next four years.

If you’ve decided you’d like to invest in commercial property in the coming months or years, you might be considering which financial tools you’d like to seek support from. Here’s how bridging loans could provide the key to helping you unlock commercial real estate opportunities.

What is a bridging loan?

A bridging loan is a short-term loan similar to a secured loan– it’s designed to help you bridge the gap between funding sources. The acquired property serves as security, the loan usually takes under a month to process, and terms can go up to around 12 months.

How can a bridging loan help you buy commercial real estate?

Bridging loans are a popular tool used for property development. They can also help bridge the gap between the purchase of one commercial property and the sale of another.

Example: Let’s say you’re at an auction house and the perfect property comes up for sale. You’ve decided you want it and you win the bidding war.

Most auction houses require you to pay the full amount for the property within four weeks. But obtaining a commercial mortgage, completing the sale on a different property, or releasing funds from other tied up sources can take much longer than this timeline allows.

A bridging loan can help by enabling you to purchase the property today and repay the money once you’ve secured other forms of funding.

How much do bridging loans cost?

Bridging loan interest rates are charged on a monthly basis, rather than annually. Interest rates vary but tend to fall between 0.4% and 2%.

You’ll also likely be charged admin and setup fees, which can cost anywhere between 1% and 3% of the total loan amount. Similar to a commercial mortgage, the lender may want you to conduct a valuation and there could be legal fees.

How much could I borrow?

Generally, how much you can borrow will depend on your affordability, creditworthiness, and the total value of the property. You’ll usually be able to borrow up to 75% of the value of the commercial property. At Funding Options by Tide, we help eligible borrowers apply for funds between £1000 and £20M, depending on the company and its needs. 

Find a bridging loan with Funding Options by Tide

We help match businesses to our network of over 120+ lenders. Borrowers may be eligible for between £1,000 and £20M. Click the link below to start the application process and find out if you are eligible for a bridging loan. 

Find a bridging loan

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.