Leveraging bridging loans to fund your new construction project

Need fast funding to support your new construction project?

No one knows better than project developers and construction companies how long a mortgage can take to close. And when you’ve got supplies to buy, contractors to pay, and land to purchase, those weeks and months of applying for a mortgage and waiting for the finances to clear can feel like years.

Not to mention, many new construction projects are put together with the sole purpose of exiting the project on completion, which makes the administrative work not seem worth it when you only need the loan for a period of several months.

With the UK construction industry generating an impressive £14,940 million in April 2024 alone, it’s no surprise some construction companies are looking for funding solutions to power their new projects. If you’re wondering if a bridging loan is a suitable option for your business, here’s what you need to know to help you decide.

Is a bridging loan the right choice for your new construction project?

Maybe – it depends on your unique circumstances. Do you need a fast funding solution to power your new construction project? Do you plan to give the money back within 12 to 24 months? Do you have an iron clad exit plan? Then a bridging loan might be for you.

On the other hand, if you’re not certain about timelines, predict possible delays, or are looking for longer loan term lengths, you might like to look into getting a commercial mortgage.

Example: Let’s say you’re a small property development company working in the Midlands. You’ve acquired a new set of office buildings and would like to upgrade the interiors to increase the value of the buildings. The project will cost you £50,000 and you plan to pay for it by selling off two of the office units at the end of the renovation project. You have a solid understanding of the market, the value of those two units, and the time expectations of a project like this. In this case, when it comes to deciding between a bridging loan and a traditional mortgage, a bridging loan could be a suitable solution.

How does a bridging loan work?

A bridging loan is a short term funding solution. You apply and if you’re accepted you pay a monthly repayment for a period usually not surpassing 2 years, then you repay the loan in its entirety, usually either by closing off a sale or when the funds from a mortgage come through.

It’s important to bear in mind that this speed and flexibility does not come without its drawbacks. For starters, bridging loans generally come with higher interest rates when compared to traditional mortgages. The application process usually requires the submission of an exit plan, and if you don’t repay the loan within the agreed time frame you run the risk of repossession.

Apply for a bridging loan

We help property developers and construction companies secure funding from our network of over 120 lenders. Just click the link below to find out if you’re eligible for a bridging loan.

Compare and apply for bridging loans

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.