Commercial Bridging Loan

A commercial bridging loan is short term finance secured against commercial or semi commercial property. It is designed for situations where speed matters and traditional lending is either too slow or unavailable. Completions can happen in as little as three to five days for straightforward cases, making bridging the go to option for auction purchases, business acquisitions, refurbishment projects, and time sensitive deals.

This guide covers what qualifies as commercial, how the loans work, typical costs, what lenders look for, and how to structure a deal that completes quickly.

What Qualifies as Commercial Property?

For bridging loan purposes, commercial property is any property that is not used as a private residence. This includes:

• Offices, retail units, and shops
• Warehouses, industrial units, and factories
• Pubs, restaurants, and hotels
• Care homes and medical premises
• Gyms, leisure centres, and educational buildings
• Land with or without planning permission

Semi commercial (mixed use) property contains both a commercial and a residential element. A common example is a flat above a shop. Most lenders classify a property as commercial if more than 40% of the floor area or value is used for commercial purposes. Semi commercial properties with a smaller commercial element may be treated as residential by some lenders, which can result in better rates and higher LTV.

Typical Uses for Commercial Bridging Loans

Commercial bridging loans are used across a wide range of scenarios:

• Purchasing commercial premises: Acquiring an office, warehouse, or retail unit when the seller needs a fast completion or the property is not mortgageable in its current state
• Auction purchases: Meeting the 28 day completion deadline on commercial lots bought at auction
• Mixed use acquisitions: Buying properties with both residential and commercial elements, such as flats above shops or live/work units
• Development and conversion: Funding the purchase of commercial buildings for conversion to residential use under permitted development rights
• Refurbishment: Financing the renovation of commercial premises to increase value before refinancing onto a long term commercial mortgage
• Business expansion: Releasing equity from an existing commercial property to fund business growth, stock purchase, or working capital
• Chain break: Bridging the gap when selling one commercial property and buying another where timings do not align
• Refinancing: Repaying an existing lender quickly, for example to avoid a receiver being appointed or to settle a dispute

Loan to Value (LTV)

Commercial bridging loans typically offer a maximum LTV of 70% to 75% on commercial property. This is lower than residential bridging, which can reach 75% to 80%. The reason is straightforward: commercial property is harder to sell quickly if the borrower defaults, so lenders take a more conservative approach.

LTV varies by property type:

• Standard commercial (offices, retail, industrial): Up to 70% to 75% LTV
• Semi commercial / mixed use: Up to 75% LTV
• Land without planning: Typically 50% to 60% LTV
• Land with planning: Up to 65% to 70% LTV
• Specialist commercial (pubs, hotels, care homes): Assessed individually, often 60% to 65% LTV

Lower LTV applications typically secure better rates. Sub 60% LTV unlocks the sharpest pricing from the widest range of lenders.

Rates and Interest

Commercial bridging loan rates in early 2026 typically range from 0.75% to 1.25% per month, depending on the LTV, property type, borrower profile, and exit strategy. For straightforward commercial properties at lower LTV, rates at the lower end of this range are achievable. More complex cases involving specialist property types, higher LTV, or less certain exit strategies will attract rates towards the upper end.

Interest can be structured in several ways:

• Rolled up: Interest is added to the loan balance and repaid along with the capital at the end of the term. This is the most common structure for bridging loans and means no monthly payments are required during the loan term.
• Retained: The total interest for the loan term is deducted from the advance at completion. The borrower receives a lower net amount but makes no payments during the term.
• Serviced (monthly payments): Interest is paid monthly, similar to a standard mortgage. This reduces the total cost but requires ongoing cash flow.

Loan Terms

Commercial bridging loans are short term by nature. Typical terms range from 1 to 24 months, with 12 months being the most common. Some lenders offer terms up to 36 months for larger or more complex projects.

Early repayment is usually permitted without penalty, and many lenders only charge interest up to the date of repayment rather than for the full agreed term. This is an important point to confirm before proceeding, as some lenders charge a minimum interest period (commonly three to six months).

Exit Strategies

The exit strategy is the single most important factor in a commercial bridging loan application. It is how you will repay the loan, and the lender needs to be confident it will work. The three most common exit strategies are:

1. Sale of the property: You plan to sell the property (either as is or after refurbishment/conversion) and repay the loan from the proceeds. Evidence such as a marketing strategy, estate agent appraisal, or exchange of contracts strengthens this exit.
2. Refinance onto a commercial mortgage: You plan to refinance the bridging loan onto a long term commercial mortgage or buy to let mortgage once the property is in a mortgageable condition. A decision in principle from the long term lender significantly strengthens this exit.
3. Sale of another asset: You plan to repay the loan from the proceeds of selling a different property or asset. Evidence of the asset’s value and marketability is required.

Weak or speculative exit strategies are the most common reason for bridging loan applications being declined. The more evidence you can provide that your exit will happen on time, the better your chances of approval and the better rate you will achieve.

First Charge vs Second Charge

A first charge bridging loan is secured as the primary debt against the property. If the borrower defaults, the first charge lender is repaid first from the sale proceeds. Most commercial bridging loans are first charge.

A second charge bridging loan sits behind an existing first charge mortgage. It is repaid after the first charge lender in the event of a default. Second charge commercial bridging is available but less common, typically more expensive (rates are higher to reflect the increased risk), and requires the consent of the first charge lender.

Second charge bridging can be useful for releasing equity from a commercial property that already has a mortgage, without disturbing the existing lending arrangement.

Unregulated Status

Commercial bridging loans are unregulated by the Financial Conduct Authority (FCA). This means the borrower does not receive the same protections that apply to regulated residential mortgages, such as the right to complain to the Financial Ombudsman Service or coverage under the Financial Services Compensation Scheme.

The unregulated status has a practical benefit: the application process involves significantly less paperwork and fewer procedural requirements than a regulated mortgage. This is one of the reasons commercial bridging can complete so quickly. However, it also means borrowers need to take particular care to understand the terms, fees, and consequences of default before committing.

If the property includes an element of residential occupation (for example, a flat above a shop where you or a family member will live), the loan may need to be regulated. This is assessed on a case by case basis.

Speed of Completion

Speed is one of the primary reasons borrowers choose bridging finance over traditional commercial lending. Typical completion timelines are:

• Small loans (up to £300,000): 3 to 7 days where a desktop valuation is acceptable
• Medium loans (£300,000 to £750,000): 7 to 14 days
• Larger loans (above £750,000): 14 to 28 days, depending on the complexity of the legal work and valuation requirements

The fastest completions happen when the borrower has their legal representation instructed, the property is straightforward, and the lender can use a desktop or drive by valuation rather than a full physical inspection.

Fees Breakdown

Commercial bridging loans involve several costs beyond the interest rate:

• Arrangement fee: Typically 1% to 2% of the gross loan amount. This can usually be added to the loan rather than paid upfront.
• Valuation fee: Varies depending on the property value and complexity. For commercial property, expect £500 to £3,000 or more for specialist valuations. Desktop valuations are cheaper but not always accepted.
• Legal fees (lender): The borrower pays the lender’s legal costs, which typically range from £1,000 to £3,000 for straightforward cases.
• Legal fees (borrower): Your own solicitor’s costs, which vary but are typically similar to the lender’s legal fees.
• Broker fee: If using a broker, fees are typically 0.5% to 1% of the loan amount or a fixed fee. Some brokers are paid by the lender directly.
• Exit fee: Some lenders charge an exit fee (typically 1% to 1.5% of the loan) when the loan is repaid. Many lenders do not charge exit fees, and this is worth confirming before committing.

On a £500,000 commercial bridging loan over 12 months at 0.85% per month with a 1.5% arrangement fee, the total cost of the loan would be approximately £58,500 in interest plus £7,500 in arrangement fees plus valuation and legal costs. The total finance cost is likely to be in the region of £70,000 to £75,000.

What Lenders Look For

Commercial bridging lenders focus on four key areas:

1. Security: The property must provide adequate security for the loan. Lenders will commission a valuation and assess the property’s condition, location, and marketability.
2. Exit strategy: As covered above, this is the most critical factor. The lender needs confidence the loan will be repaid on time.
3. Borrower experience: Experienced property investors or business owners are viewed more favourably, though first time borrowers are not excluded.
4. Deposit or equity: The borrower must provide the difference between the loan amount and the property value, typically 25% to 30% for commercial property.

Credit history is checked but is less of a barrier than with traditional lending. Many commercial bridging lenders will consider applications from borrowers with adverse credit, county court judgments, or even previous insolvency, provided the security and exit strategy are strong.

Commercial Bridging vs Traditional Commercial Mortgages

A traditional commercial mortgage is cheaper in terms of interest rates (typically 3% to 6% per annum compared with 9% to 15% per annum for bridging), but it takes 6 to 12 weeks to arrange and requires extensive documentation. Bridging is the right choice when speed is essential, the property is not currently mortgageable, or you need short term finance while arranging longer term funding.

Many borrowers use bridging as the first stage of a two step process: bridge to acquire or refurbish the property, then refinance onto a commercial mortgage once the property is in a suitable condition.

For related guidance, see our pages on property development finance and regulated bridging loans.

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