Bridging loans are a uniquely flexible short-term facility secured against eligible assets or property and issued at competitive rates. Unlike conventional loans or mortgages, poor credit bridging loans are widely available for applicants with an imperfect credit history.

Bad credit bridging loans work in exactly the same way as their conventional counterparts. Importantly, adverse credit-bridging loans can be arranged with equally competitive interest rates and borrowing costs.

With bridging finance, what matters most to the lender is the applicant’s capacity to offer viable assets to cover the costs of the loan and repay the balance in full at a later date. If you can present a convincing case and own assets of high enough value to secure the loan, you have a strong chance of qualifying for a bridging loan, irrespective of the kind of adverse credit issues that would normally count you out of the running on the high street.

Should I use a specialist poor credit bridging loans broker?

Seeking support from a broker with extensive experience in poor credit bridging loans is essential. This is for two reasons, the first of which is the importance of presenting a credible and convincing application. Your broker will provide you with the complete support you need to maximise your likelihood of qualifying for a competitive loan.

Secondly, many of the market’s best bridging lenders offer their services exclusively via broker introductions. This means that the only way to gain access to the services they provide is with the help of an experienced broker.

Can I get a bridging loan with no credit check?

Generally speaking, the answer is no; all bridging finance applications include a mandatory credit check as standard. But this is not the same ‘yes or no’ credit check conducted by traditional banks when processing loan applications.

Nor does this credit check have to leave a mark of any kind on your credit report; your broker can ensure a soft credit check is performed to preserve your credit score.

Adverse credit need not be an issue if you pass the main eligibility checks for bridging finance: acceptable assets to secure the loan and a viable exit strategy.

In all instances, your broker will provide the advice and support you need to present a convincing case to the market’s most accommodating lenders.

Over the last twelve months, we have seen a growing number of investors and developers utilise bridging finance to finance their property investments.

The finance market is well-equipped to deal with complex situations and has developed many specialist products to help find the perfect solution for any individual requiring flexibility.

Growing in popularity due to the relaxation of planning laws is the conversion of commercial properties to residential properties. As a solution to the increasing demand for housing and the closure of many businesses due to the pandemic, these conversions are providing great investment opportunities for developers. The deregulation has resulted in a far simpler and more cost-effective planning approval process, leading to many investors and developers cashing in on this new method of creating housing.

Not only are developers benefiting, but towns and cities are experiencing much-needed regeneration after the devastating effect of the pandemic on the UK economy.

The COVID lockdowns led to many businesses being forced to trade online, creating a situation where shops and other business premises were left vacant. The most affected have most definitely been the hospitality industry as well as retail and small businesses. With a huge proportion of the population being forced to work from home, the need for work premises has been greatly reduced. Business structures have changed, with many employers allowing their staff to continue to work from home on a full-time or part-time basis, thereby negating the need for workspace.

The conversion of commercial to residential is somewhat reviving the high street and attracting people back to cities and towns, particularly the young looking to get their foot onto the property market and enjoy the benefits of living in a city.

The advantage of commercial property is that it is often situated in prime locations with excellent access to bars, restaurants, transport links, job opportunities, and other attractive amenities. Many commercial buildings are on the market at extremely competitive prices; therefore, securing a good deal for a developer can lead to a very lucrative investment with the potential to generate significant capital growth.

When it comes to funding, developers and investors are turning to bridging finance. In direct reaction, many lenders are now offering specialised bridging loans in order to meet this new demand.

The most important factor for developers and investors to consider is to make sure they have properly been advised and had prior approval before they commit to the project. Once this has been done, bridging finance can then be utilised to secure the required funds to ensure the project reaches full completion.

A bridging loan is short-term finance that can be arranged quite quickly, often within days, so that buyers can take advantage of access to funds in a timely fashion.

The latest data released by Bridging Trends shows that the third quarter of this year has seen the highest volume of bridging lending since 2018, reaching over £190 million.

This is a massive jump from the previous figure of £146 million recorded in the second quarter of 2021 and a 65% increase when compared to last year (£115.52 million).

It is thought that the reason for this increase can be mainly attributed to the strong property market seen before the stamp duty holiday was tapered and ultimately stopped.

The most popular use of bridging finance for the second consecutive quarter was for the purchase of property, with 28% of total contributor transactions (up from 24%), followed by a lower figure of 13% for chain break (down from 20% in the previous quarter).

There was also a surge in demand for auction finance, from 4% in Q2 to 11% in Q3.

First-charge bridging loan finance, which accounted for 90% of the total market volume, remains unchanged.

There was, however, a drop in regulated bridging loan transactions for the fifth consecutive time, with figures falling from 41.6% in quarter 2 to 37.7% in quarter 3.

The data released also showed an increase in average LTV from 54.9% in Q2 to 60.2% in Q3, this being the highest since the launch of Bridging Tends in 2015. This rise indicates that borrowers are taking advantage of liquidity opportunities and the low rates available to them.

Co-founder of Adapt Finance, Stephen Burns, commented: “The most exciting part to read is ‘returns to’ when referring to activity levels.”

“It shows the industry was affected by the disruption the coronavirus pandemic put the country through, but more so, how it has pulled back quickly, and we are now firing on all cylinders!”

Managing director at Impact Specialist Finance, Dale Jannels, added: “These figures show that bridging finance is now a better-understood product for many brokers, and they have much more confidence in recommending this solution to their customers.”

“The stamp duty holiday allows bridging finance to be more widely accepted by the mainstream industry as a need to meet speed demands, but investors with the intention to renovate have also been at the forefront of recent requests.”

Director at LDN Finance, Chris Oatway, stated his surprise that the LTV was as low as 60% on average, stating that they had seen an increased demand for higher leverage deals at 70%–75% LTV.

“Regulated transactions accounting for over a third of the market stand out when you consider the limited number of bridging lenders who are able to transact regulated business and show there’s opportunity there for more lenders to enter this market,” he added.

Head of specialist lending at Enness Global, Chris Whitney, said: “With the news that contributor gross bridging loans are over £190 million, it makes me wonder how big this market really is in its entirety.

LTVs are up, with borrowers possibly taking advantage of increasingly cheaper money in the light of reports that mortgage rates, in general, are heading upward imminently.

However, with continuing competition and even more new entrants in the short-term lending space, it will be interesting to see how that pans out with so many lenders looking to increase market share in a seemingly very liquid environment.”

“At 60% LTV, I think we are still seeing prudent levels of borrowing by people and responsible lending from the funders.”

He also added that he wasn’t at all shocked by the increase in processing times, stating that it would be a direct result of increased volumes, valuers being stretched, and lenders finding it difficult to recruit good underwriting.

“With the highest use of funds being for investment purchases, I think it really shows how much confidence people have in UK real estate.”

The latest figures from ASTL indicate strong quarterly performance for the bridging sector in Q2 this year; up an impressive 23.2%, total completions for the three-month period came out at £1.1 billion.

The high number of completions during this period meant that bridging loan books increased to more than £4.7bn, up from £4.4bn in the first quarter.

Commenting on the figures, ASTL CEO Vic Jannels said the increase in completions was reflective of a significant reduction in completions during the first quarter of the year, with the market having subsequently corrected itself.

Despite the higher number of completions and growth in overall market value, bridging finance applications were down in Q2 compared to Q1. Total application volumes were down 1.7% to reach a total of £7.36 billion.

Compared to the same period last year, total bridging applications at the end of June were up approximately 27% from 2020.

The outlook is therefore seen as generally positive for the sector, with around 90% of lenders saying they expect their businesses to grow over the remainder of the year.

Bridging loan default value down

ASTL’s figures also suggest that the total value of bridging loans in default is still on the decline since the start of the year. Compared to Q1, the value of bridging loans in default was down 7.6% in Q2.

Consequently, repossessions were also down over the past three months compared to the start of the year, indicating that the gradual return to normality after 18 months spent in lockdown could be having a positive effect.

ASTL also reported that the average bridging loan LTV currently stands at fewer than 60%, a fractional increase on the figure reported in Q1.

“The falling value of loans in default and the number of repossessions reflect the quality of lending and show that the market is continuing to grow sustainably and enhance its ever-improving reputation,” commented Vic.

“In this growing market, ASTL lenders continue to represent a benchmark of quality and customer focus, providing brokers with a source of flexible short-term finance that they can trust.”

FC Barcelona have rarely been out of the headlines over the past few months, primarily due to the sensational departure of Lionel Messi after a lifetime spent with the club.

The president of FC Barcelona, Joan Laporta, has spoken of the “very worrying” financial situation the club is currently in. Having revealed that Barcelona is now approximately €1.35bn (£1.15bn) in debt, he blamed what he referred to as a “terrible inheritance” on his predecessor, Josep Bartomeu.

He also highlighted Lionel Messi’s departure as a key factor in the “dramatic” situation Barcelona now faces, resulting in a Goldman Sachs bridging loan valued at €595 million being taken out to save the company from outright bankruptcy.

Laporta remains adamant that Bartomeu should be held accountable for the financial meltdown currently taking place behind the scenes.

His comments came at a recent press conference when he cited excessive salaries as one of the reasons behind the club’s unsustainable financial position.

“Our salaries represent 103 per cent of the club’s total income. That’s 20–25 per cent more than our competitors,” he said.

“The first thing we had to do when we arrived was to ask for a loan of €80 million because otherwise, we could not pay the salaries. The previous regime was full of lies.”

He also went on to blame his predecessor for leaving him with huge stadium repair and maintenance bills to cover, along with failing to be truthful about promised wage cuts.

“We also found that we had to do some urgent repairs to the Camp Nou because otherwise, it posed a risk to the attending fans. We also found out that the club had already received 50 per cent of the TV rights fees in advance.”

“We found the wage policy in the form of an inverted pyramid: veterans on long contracts and youngsters on short deals. There were no wage cuts.

“We have found that disproportionate payments have been made to intermediaries, not even agents.”

Speaking on behalf of Sky Sports News, Kaveh Solhekol warned that FC Barcelona is currently in a “terrible” financial situation, with no obvious way out for the time being.

“Barcelona has a negative net worth of €451 million; it is a terrible inheritance. What has been happening is very worrying,” he said.

“Bartomeu’s (open) letter is an effort to justify management that is unjustifiable. It is an exercise in desperation. They are responsible for everything until March 7. They will not escape their doing.”

Speaking on the future of the club, Laporta spoke confidently about Barcelona’s ability to resolve its financial troubles while confirming its receipt of a bridging loan worth “€550 million with an interest rate of 1.1 percent to restructure the club.”

“The situation is dramatic, but we have good news,” said Laporta.

“The strategic plan based on our credibility and experience and on the assets that Barcelona has makes this situation temporary. I think that in a couple of years, the club’s economy will be healthy.”

“We are not scared at all. We are highly motivated and positive, and morale is high. It’s a big challenge, but we are capable of overcoming it.”

“I’d like to call on all Barcelona fans and the entire club to be united. With football and unity, I’m convinced this era will be full of success.”

A bridging loan is essentially a short-term commercial loan secured against an appropriate property or asset. It is designed to be repaid within a matter of months; bridging finance can be uniquely cost-effective over the short term.

Another major point of appeal with bridging finance is the speed with which it can be arranged; typical loan completion times are no longer than two weeks, though it is often possible to access the funds required within just a few days.

This can make bridging loans an immensely useful and versatile product for smaller businesses that routinely encounter unexpected outgoings and cash flow shortages.

How does a bridging loan work?

Bridging finance works in almost exactly the same way as a typical secured loan; the funds are issued against an asset of value, typically the applicant’s home or a business premises, and are repayable by the borrower along with the agreed rate of interest.

What differentiates bridging finance from a typical secured loan is the short-term nature of the facility. Bridging finance is designed to be repaid within a few months in the form of a single lump-sum payment on an agreed date.

There are typically no monthly instalments for the duration of the loan, and the balance in its entirety is repaid in a single payment.

What can I use bridging finance for?

Bridging loans are also advantageous in that they can be used for any legal purpose whatsoever. If you have an asset of value your lender is willing to accept, the funds raised can be invested or allocated in any way you like.

Just a few of the most popular uses for bridging finance are as follows:

• Purchasing properties at auction at rock-bottom prices.
• Buying non-standard properties to refurbish or repurpose.
• Covering urgent outgoings or unexpected cash flow shortages.
• Investing in equipment and machinery for business purposes.
• Relocating to new premises or property expansions.
• Paying tax bills to avoid possible penalties.

In all of the above instances, bridging finance can be more convenient and cost-effective than any conventional loan. again, under the strict condition that the funds are repaid in a timely manner as agreed.

Who can qualify for bridging finance?

As with all loans, lending criteria vary significantly from one lender to the next.

As a general rule of thumb, you can expect the following verification checks as part of the application process:

• Proof of identity and residency.
• Evidence of a viable exit strategy (repayment plan).
• Formal valuation of your property.
• Proof of income and expenditure.
• Verification of current financial position.
• Full credit history check.

In spite of the above, it is worth remembering that many lenders issue bridging finance primarily on the basis of security. If the value of the property used to secure the loan vastly exceeds the total loan value, other verifications (like credit history checks) may not be necessary.

If you have any questions or concerns regarding your eligibility for bridging finance, ensure they are raised with your broker before applying. This will help ensure you target the right lenders with your application in order to secure an unbeatable deal.