Commercial Bridging Loans: shops, offices, semi-commercial and more

Commercial Property Types Financed by Bridging Finance Broker

• Shops, offices, industrial units, mixed-use (shop + flats)
• Vacant commercial property awaiting tenants or conversion
• Auction commercial lots on the 28-day clock
• Owner-occupier purchases where the business needs speed

How commercial deals are priced

Commercial loans run at lower loan to value than residential, typically up to 70% gross and often 65%, and the tenancy position moves the price. A property let to a solid tenant on a proper lease beats one standing empty. Semi-commercial, like a shop with flats above, usually prices somewhere between the two.

Why the loan to value is lower, and what nets down

Walk down your local high street and count the empty units. That's the risk the lender is pricing. If you don't convert it, or the planning doesn't come, and then nobody wants to rent it from you, the lender is left having to repossess an empty commercial unit and sell it on. That's a hard thing to sell, so they lend less against it in the first place.

So 70% gross, often 65%. And remember gross isn't what you receive. Roughly speaking, 70% gross nets down to about 60%, and 65% nets down to about 55%, once the fees and the retained interest come off. Work from the net figure, because that's the money that does the job.

Vacant possession, and why the valuation surprises people

On commercial, most lenders value on a vacant possession basis, and often a 180 day one. That means they're not valuing it at what it's worth with your business humming away inside it. They're valuing it at what it would fetch, empty, if it had to be sold reasonably quickly. On a semi-commercial property, a shop with a flat over it, the two halves get valued differently, and the residential half will often carry the deal.

Take the twelve months

On a commercial bridge I wouldn't take a term shorter than twelve months, and I would say that to anyone. Commercial tenants take longer to find than residential ones. If you're also converting or refurbishing, the works take what they take. A six month term looks cheaper on the illustration and then costs you a great deal more when you need an extension.

Using a bridge as the cash equivalent

This is the part most people miss. When a seller says cash only, what they usually mean is speed. They want it done and they will discount the price to get it done.

A live example. An office block with four offices, worth around £450,000, and the vendor wants a quick sale at £375,000. My client doesn't have £375,000 sitting in an account. But we've completed a bridge in four days before, so he can go back to that vendor and commit to completing in two weeks. If the seller accepts, he's bought at £375,000 something worth £450,000, and he's going to occupy one office and sublet the other three.

Bridging isn't cheap and the fees eat into that gap, so it's not seventy five thousand pounds of profit. But the principle holds, and it's the best thing anyone taught me in this industry: you make your money when you buy the property, not when you sell it. Some lenders will also lend against the open market value rather than the price you paid, which can mean less of your own money going into the deal.

And on a deal like that I start the exit on day one. While the bridge is being arranged I'm already talking to remortgage lenders, telling them exactly what is happening and why the price is below the value, so the application goes in within a day or two of completion rather than months later.

A recent commercial deal

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