Can a New Company Get a Bridging Loan? The Surprising Truth Revealed!

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Can a New Company Get a Bridging Loan? The Surprising Truth Revealed!

If you’re a new property developer, investor, or business owner in the UK, you may be wondering: Can a new company get a bridging loan? The short answer is yes! However, securing one requires understanding how lenders assess risk, what unique advantages bridging loans offer, and how to improve your chances of approval.

In this guide, we’ll break down everything you need to know about getting a bridging loan for a new company—without the jargon—so you can make informed, confident decisions.

What is a Bridging Loan?

A bridging loan is a short-term finance solution designed to ‘bridge the gap’ between a funding need and a longer-term financial arrangement. These loans are commonly used for:

  • Property purchases (including at auctions)
  • Development projects
  • Business cash flow needs
  • Preventing property chain breaks
  • Urgent investment opportunities

Bridging loans are typically repaid within 6-24 months, making them ideal for situations where quick access to capital is needed.

Can a Brand-New Company Get a Bridging Loan?

Yes! Even if your company is newly formed, lenders will consider your application. However, since new businesses lack trading history, you’ll need to provide strong supporting evidence to reassure lenders of your ability to repay.

Key Factors Lenders Consider for New Companies

  1. Security (The Property/Asset Used as Collateral)
    • Bridging loans are secured loans, meaning the lender needs a valuable asset (usually property) to lend against.
    • If your new company owns or is acquiring property, this can be used as security.
  2. Exit Strategy (How You’ll Repay the Loan)
    • A well-defined exit strategy is crucial. Lenders want to see how you’ll repay the loan at the end of the term.
    • Common exit strategies include refinancing with a mortgage, selling the property, or using business profits.
  3. Personal Guarantees
    • Many lenders will require a personal guarantee from the business owner or directors if the company has no financial history.
    • This means you, as the owner, will be personally liable for the loan if the company cannot repay it.
  4. Your Experience & Track Record
    • Even if your company is new, lenders may consider your personal experience in property development or investment.
    • If you’ve successfully completed similar projects, this can improve your approval chances.
  5. Loan-to-Value Ratio (LTV)
    • The amount you can borrow depends on the property’s value. Most bridging lenders offer up to 75% LTV.
    • A lower LTV can make approval easier, as it reduces the lender’s risk.
  6. Credit History
    • A perfect credit score isn’t always required, but it helps.
    • Some lenders specialise in bad credit bridging loans, but interest rates may be higher.

Costs and Fees of Bridging Loans

Bridging loans are a fast and flexible funding option, but they come with specific costs. Understanding these fees can help you plan effectively.

1. Interest Rates

  • Bridging loan interest rates typically range from 0.45% to 1.5% per month, depending on the lender, loan amount, and risk profile.
  • Unlike mortgages, bridging loan interest is often charged monthly rather than annually.

2. Arrangement Fees

  • Lenders charge 1% to 2% of the loan amount as an arrangement fee.
  • This is a one-time upfront cost for setting up the loan.

3. Valuation Fees

  • The property used as security must be professionally valued.
  • Costs typically range from £300 to £2,000, depending on the property size and location.

4. Legal Fees

  • Both the borrower and lender need legal representation.
  • Expect to pay £500 to £3,000+, depending on the complexity of the loan.

5. Exit Fees

  • Some lenders charge an exit fee, typically 1% of the loan amount, when you repay the loan.
  • Not all lenders apply this fee, so it’s worth checking before committing.

The Bridging Loan Application Process

Applying for a bridging loan can be quick and straightforward if you’re prepared. Here’s a step-by-step breakdown:

Step 1: Initial Inquiry

  • Contact a bridging loan broker or lender to discuss your needs.
  • They’ll assess whether your company qualifies and provide initial terms.

Step 2: Loan Agreement in Principle (AIP)

  • If the lender is satisfied, they’ll issue an Agreement in Principle (AIP), outlining the loan amount, interest rate, and fees.
  • This is a conditional offer, subject to valuation and legal checks.

Step 3: Property Valuation

  • A surveyor assesses the property’s value to ensure it meets lending criteria.
  • A lower-than-expected valuation may reduce the amount you can borrow.

Step 4: Legal Process

  • Solicitors handle contracts, loan agreements, and property checks.
  • This process can take 1-3 weeks, depending on complexity.

Step 5: Funds Released

  • Once all checks are complete, funds are transferred—usually within 24 to 48 hours after signing.

Why Bridging Loans Are Ideal for New Companies

Unlike traditional bank loans, bridging finance is fast, flexible, and based on assets rather than company history. Here’s why they’re a great option for new businesses:

1. Fast Access to Capital

  • Traditional loans can take months to secure; bridging loans can be approved within days.
  • This is perfect for auction purchases or time-sensitive opportunities.

2. No Lengthy Trading History Required

  • Unlike traditional business loans, bridging lenders focus on asset value and exit strategy rather than trading history.
  • Even startups can qualify if they have suitable security.

3. Short-Term Commitment

  • Bridging loans are designed for short-term needs, so you’re not tied into long repayment terms.
  • Ideal for flipping properties or securing a deal while waiting for long-term finance.

4. Flexible Lending Criteria

  • Some lenders are open to creative financing solutions, including loans to new SPVs (Special Purpose Vehicles).
  • If structured correctly, your new company can access significant funding.

Final Thoughts: Should You Get a Bridging Loan for Your New Company?

Bridging loans can be a fantastic tool for new property developers and businesses needing quick funding. While a lack of trading history can be a hurdle, having the right security, exit strategy, and expert guidance can make approval much easier.

At Sunrise Commercial, we specialise in helping new businesses secure bridging loans. If you need fast funding, expert advice, and access to top lenders, get in touch today!

For more information contact us for a fees free chat.

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📧 Email: john@sunrisecommercial.co.uk

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