Benefits of bridging finance for land acquisition in the UK
Land bridging finance can be beneficial for those who are purchasing large assets but do not have the funds to complete. It's often used to fund purchases of commercial land, but it could also be used to purchase undeveloped land, including agricultural sites and quarries.
Land that has yet to be developed or improved has the potential to be more lucrative in the future, especially if you purchase it at a discounted rate, which is known as purchasing below the market value.
This type of financing is commonly used in situations where the opportunity to buy the land is also very time sensitive. In the current economic climate land sells fast. November 2021 saw non-residential property transactions jump by over 10% from the month before, and for residential property the transaction increase was even greater at over 22% (Source HMRC). The price of land, being circa 45% of the developed market value, generally increases in line with house prices, and as such it's attractive to investors seeking to either land bank or develop.
Investors and developers tend to opt for financing through a land bridging loan rather than traditional banks as bridging loans are typically much quicker to arrange and as they're a secured loan, often against the land being purchased.
Secured loan providers are also more flexible in their lending approach, for example they'll consider bad credit or adverse credit whereas this could stop traditional banks from considering the loan. The terms of a bridging loan can also be negotiated, which is not always possible with a traditional loan from a bank.