Are Bridging Loans Too Expensive for Business? Here’s the Truth You Need to Know!
If you’ve been considering a bridging loan for your business or property investment, you’ve probably heard people say, “They’re too expensive!” But is that really the case?
Yes, bridging loans often come with higher interest rates than traditional loans, but comparing the two is like comparing a sports car to a family SUV—they serve completely different purposes.
The real question isn’t how much a bridging loan costs, but whether it helps you make more money than it costs. If the answer is yes, then it’s not expensive—it’s a business tool that enables profit.
In this guide, we’ll break down:
✅ How bridging loans can be a cost-effective business tool
✅ The tax advantages of bridging finance
✅ Why speed & flexibility make bridging loans valuable
✅ How to make sure a bridging loan is right for you
Let’s dive in!
Are Bridging Loans Expensive? It Depends on How You Use Them!
A bridging loan is a short-term, fast-access loan, usually secured against property or assets. It’s designed to help businesses and investors seize opportunities quickly when traditional finance is too slow.
Bridging loans typically charge interest rates from 0.45% to 1.5% per month, which sounds high compared to mortgages or business loans. However, they are designed for short-term use—typically 3 to 18 months—so comparing them to a 25-year mortgage isn’t fair.
The key question is: Does the loan help you make money?
If you take out a bridging loan for:
🏡 Buying a property to refurbish and sell at a higher price
📦 Purchasing stock that will generate fast profits
🏗️ Developing land or property for resale or rental income
🛠️ Buying equipment or materials to fulfill a profitable contract
Then the profit outweighs the cost of the loan, making it a smart business move rather than an “expensive” one.
Bridging Loan Interest is Tax-Deductible for Businesses
One huge benefit that many business owners and property investors overlook is that bridging loan interest is tax-deductible when used for business purposes.
This means that when you calculate your business’s taxable income, you can deduct the cost of the bridging loan interest, reducing your tax bill.
Example: How Tax Relief Makes Bridging Loans More Affordable
Let’s say you:
✔️ Borrow £200,000 using a bridging loan for 6 months at 1% per month.
✔️ Your total interest cost = £12,000.
✔️ Since the loan was used for business, this £12,000 is tax-deductible.
✔️ If you’re in the 40% tax bracket, you save £4,800 in tax, reducing your real cost to £7,200.
By factoring in tax relief, your real cost of borrowing is lower than it first appears!
The Real Value: Speed & Flexibility Over Traditional Loans
Why Choose a Bridging Loan Instead of a Traditional Loan?
Traditional business loans and mortgages are cheaper but take weeks (or months) to approve. If you’re in a fast-moving property or business market, waiting that long could mean losing out on an opportunity.
🔹 Bridging loans can be approved in 24-48 hours—helping you act before competitors.
🔹 Lenders focus on the deal rather than credit history—if you have a profitable exit strategy, approval is faster.
🔹 You can secure finance even with complex circumstances, such as auction purchases or development projects.
Example: How a Fast Bridging Loan Creates Profit
Imagine a property investor spots a rundown house at auction for £150,000. They know that with £30,000 of refurbishments, they could sell it for £250,000—a £70,000 potential profit!
But they need to pay within 28 days, and their bank says a mortgage will take 12 weeks.
Instead, they:
✅ Take a £150,000 bridging loan, complete the purchase in 10 days.
✅ Use another £30,000 in cash for refurbishments.
✅ Sell the property 4 months later for £250,000.
✅ Repay the loan plus £9,000 in interest & fees.
✅ Final profit = £61,000 after loan costs!
In this case, the bridging loan wasn’t expensive—it was an investment tool that created profit.
How to Make Sure a Bridging Loan is Right for You
To make the most of a bridging loan:
✔️ Have a clear exit strategy – How will you repay it? (Sale, refinance, business profits?)
✔️ Know your costs & expected profits – Will the loan help you make money?
✔️ Choose the right lender & terms – Work with an experienced broker to get the best deal.
✔️ Understand the tax benefits – Speak to an accountant to maximize deductions.
When a Bridging Loan is NOT a Good Idea
🚫 If you don’t have a clear plan to repay the loan, the high interest can eat into your profits.
🚫 If your investment isn’t profitable, you could struggle with repayments.
🚫 If you just need a long-term loan, a mortgage or business loan may be better.
Final Verdict: Are Bridging Loans Expensive?
Bridging loans can seem expensive at first glance, but when used correctly for business purposes, they are a powerful financial tool.
Instead of asking “Are bridging loans expensive?”, ask:
👉 “Will this loan help me make more money than it costs?”
If the answer is yes, then it’s not a cost—it’s an investment.
At Sunrise Commercial Finance, we specialise in helping businesses and property investors secure the right bridging finance for their needs.
For more information contact us for a fees free chat.
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📞 Call us at 07939 091418
📧 Email: john@sunrisecommercial.co.uk
🌐 Visit: https://www.sunrisecommercial.co.uk/
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