Bridging finance for commercial property development
How a bridge funds the acquisition and pre-planning of a commercial scheme before development finance takes over.
A bridge funds a fast or auction commercial site purchase, or holds a site through pre-planning, completing in days to a few weeks at around 0.65 to 1.0 percent a month. It then exits onto commercial development finance once planning is in place and the build is ready to start.
At a glance
- Used forAcquisition and pre-planning
- SpeedDays to a few weeks
- Cost~0.65 to 1.0% per month
- ExitOnto development finance
What is a bridging loan?
A bridging loan is short-term, interest-only funding secured against property, designed to be repaid quickly from a defined exit.
In development it bridges the gap between buying a commercial site and putting development finance in place.
What developers use a bridge for
- Securing a fast or auction commercial purchase
- Holding a site through the pre-planning period
- Buying a site with planning potential before consent
- Bridging the end of a scheme while a sale or refinance completes
Bridging versus commercial development finance
| Bridging | Development finance | |
|---|---|---|
| Purpose | Acquire / hold a site | Fund the build |
| Speed | Days to weeks | Weeks |
| Cost | Per month, higher | Per year, lower |
| Drawdown | Lump sum | Staged against works |
Commercial versus residential bridging
Commercial bridging is secured against commercial or mixed-use property and is unregulated where the borrower is a company or experienced investor. The underwriting weighs the asset, the exit and the borrower rather than affordability in the regulated sense.
Open versus closed bridging: the two types
| Type | Exit |
|---|---|
| Closed bridge | A fixed, dated exit (e.g. an agreed sale) |
| Open bridge | No fixed date, a clear but undated exit |
A closed bridge with a contracted exit prices more keenly than an open bridge, because the lender's repayment is more certain.
Key features of a development bridge
- Short term, typically up to around 12 months
- Interest-only, often retained or rolled up
- Fast completion, days to a few weeks
- Secured by a first charge over the site
- Repaid from a defined exit, usually development finance
How much can you borrow on a bridge?
Bridging leverage is driven by a few key figures: the purchase price, the open-market value, any planning uplift, and the strength of the exit. Gross leverage commonly reaches around 70 to 75 percent of value, higher where there is a clear below-market purchase.
What a commercial bridge costs
| Item | Typical level |
|---|---|
| Monthly interest | 0.65 to 1.0% per month |
| Arrangement fee | 1.5 to 2% |
| Term | Days to ~12 months |
| Plus | Valuation, legal and exit fees |
Because it is short-term and fast, a bridge costs more per month than development finance, so the aim is to bridge only as long as needed. Our bridging loan calculator estimates the total.
How to secure the best development bridging loan
- Have a clear, evidenced exit before you draw the bridge
- Demonstrate the open-market value and any below-market purchase
- Keep the term as short as the plan allows
- Line up the onward development facility in parallel
- Compare the whole bridging panel, not one lender
Plan the exit from the start
We set up the bridge and the onward commercial development facility together, so the route off the bridge is clear before you draw it. That avoids an expensive bridge with no committed exit.
Worked example: bridging an auction purchase
A developer wins a commercial site at auction with a 28-day completion and no time to arrange development finance.
| Step | Detail |
|---|---|
| Auction price | £800,000 |
| Bridge at 70% of value | £560,000 |
| Completion | Within 28 days |
| Exit | Onto development finance once planning lands |
The bridge secures the site on time; the developer then refinances onto a development facility to fund the build, with the bridge repaid in full.
The risks of a development bridge
- No committed exit, leaving the bridge to roll at a high monthly cost
- Planning taking longer than the term allows
- An over-optimistic value that the onward facility will not support
- Underestimating valuation, legal and exit fees
Line up the onward development facility before drawing the bridge, and keep the term realistic for the planning timeline.
How quickly can a commercial bridge complete?
A straightforward commercial bridge with a clean title and a clear exit can complete within a week or two. Auction deals routinely complete inside the 28-day window, which is exactly why developers use a bridge rather than waiting for development finance.
Regulated versus unregulated bridging
Commercial development bridging is almost always unregulated bridging, because the borrower is a company or experienced investor and the security is commercial property.
Regulated bridging applies where the loan is secured against a borrower's own home. A commercial development bridge sits outside that regulated perimeter, which is why this market moves quickly.
Can a bridge be used for renovation and refurbishment?
Yes. A bridging loan can fund the purchase and light works on a commercial building, ahead of a heavier development scheme or a refinance.
For a full ground-up build, a bridge buys the site and development finance funds the construction. For a lighter refurbishment, a bridge can sometimes carry the whole project to its exit.
First-charge and second-charge bridging
Most development bridging is first-charge bridging, secured as the senior loan against the site.
A second-charge bridge sits behind an existing loan and raises additional short-term funds against a property you already own, which can release a deposit for a new commercial scheme.
Bridging interest: retained, rolled or serviced
Bridging interest is charged monthly and handled in one of three ways:
- Retained: the lender deducts the interest from the loan up front
- Rolled up: interest is added to the balance and repaid on exit
- Serviced: interest is paid monthly from cashflow
Most development bridging rolls or retains interest, so there is nothing to service during the bridge.
How much does a bridging loan cost? A worked example
Take a £200,000 commercial bridge at 0.85 percent a month over 9 months, with a 2 percent arrangement fee.
| Item | Amount |
|---|---|
| Arrangement fee (2%) | £4,000 |
| Monthly interest | £1,700 |
| Interest over 9 months | £15,300 |
| Total cost of the bridge | £19,300 |
Our bridging loan calculator works the same figures for any loan, rate and term.
Bridging finance versus development finance, again
It is worth restating, because the two are often confused. Bridging is fast, short and priced per month; it acquires or holds a site. Development finance is staged, longer and priced per year; it funds the build.
On most commercial schemes the bridge and the development facility work together, and we arrange both as one plan.
When to use a bridge instead of development finance
Reach for a bridge when speed or a planning gap is the issue, not the build itself:
- An auction or off-market purchase that must complete in weeks
- A site bought before planning is secured
- A short refurbishment that does not need staged build funding
- Releasing equity quickly to fund a deposit elsewhere
Where the project is a full build, development finance is the right tool, with a bridge only for the acquisition in front of it.
What lenders assess on a commercial bridge
A bridging lender underwrites four things above all:
- The security: the type, condition and value of the commercial property
- The exit: how, and how certainly, the bridge will be repaid
- The leverage against open-market value
- The borrower's experience and the plan for the asset
The exit carries the most weight. A clear, evidenced exit is what turns a bridge from expensive to sensible.
Bridging exit routes in detail
Every bridge needs a defined repayment route. For commercial development the common exits are:
| Exit | When it fits |
|---|---|
| Onto development finance | Once planning lands and the build starts |
| Sale of the site or asset | Where the plan is to trade on |
| Refinance onto a commercial mortgage | For a let, income-producing asset |
Bridging across different commercial assets
A commercial bridge can be secured against most commercial property: offices, industrial and logistics units, retail, mixed-use buildings, and development sites with or without planning.
Bare land and specialist operational assets are harder and price higher, because the security is less liquid and the exit less certain.
How long should a commercial bridge run?
Keep the term to the time the plan genuinely needs, plus a sensible buffer. Most development bridges run three to twelve months.
Too short and you risk an extension at a higher rate; too long and you pay for time you do not use. Matching the term to a realistic planning or sale timeline is part of structuring the bridge well.
Bridging finance for commercial property development: common questions
Can I use a bridge to fund a commercial development?
A bridge funds the acquisition and pre-planning stage of a commercial scheme, then exits onto development finance once planning is in place and the build starts. It does not usually fund the construction itself.
What is the difference between bridging and development finance?
Bridging acquires or holds a site, completes fast and is priced per month; development finance funds the build, releases in stages and is priced per year. Most schemes use a bridge for the acquisition and development finance for the build.
What is the difference between open and closed bridging?
A closed bridge has a fixed, dated exit such as an agreed sale; an open bridge has a clear but undated exit. Closed bridges price more keenly because repayment is more certain.
How much can I borrow on a development bridge?
Gross leverage commonly reaches around 70 to 75 percent of value, driven by the purchase price, open-market value, any planning uplift and the strength of the exit.
How do I exit a commercial development bridge?
Most commonly onto commercial development or permitted development finance once planning is granted, or through a sale. We arrange the bridge and the onward facility together.
Can a bridging loan be used for property renovations?
Yes. A bridge can fund the purchase and light renovation of a commercial building, either ahead of a heavier development scheme or, on a smaller refurbishment, all the way through to the exit.
What are the downsides of a bridging loan?
A bridge costs more per month than development finance, so its main downside is cost if it runs longer than planned, or if the exit is not committed. Keeping the term short and lining up the onward facility first mitigates both.
How much does a £200,000 bridging loan cost?
At around 0.85 percent a month over 9 months with a 2 percent arrangement fee, a £200,000 bridge costs roughly £4,000 in fees plus about £15,300 in interest, near £19,300 in total. Our bridging loan calculator works any figure.
Ready to fund a scheme?
Send us the outline and we will come back with a view on fundability and likely terms within one working day.