How fast can I get a bridging loan?
How fast can you get a bridging loan? How can you influence the process and speed it up? Where are the usual bottlenecks & what do you need to know to avoid it stalling? We share some helpful tips.
The good news is that it is possible to go from bridging loan application through to completion and receiving funds within 3 working days for loans up to £200,000. Large bridging loans do take longer on average with loans up to £5m taking a minimum of 10 working days to complete, whereas very large loans such as those above £5m can take a month or more.
Fast bridging loan completions will only happen when every stakeholder, is motivated to do their bit, communicating accurately in a timely manner and completing their tasks effectively, without mistakes. This means the borrower needs to engage the services of a competent bridging loan broker, solicitor, valuer, lender and independent financial advisor.
Good news - you can speed up the time it will take to obtain your bridging finance by ensuring:
- you're not the reason for the delay and understand how to help the process along
- you make smart decisions on who you choose to help arrange the loan.
This article aims to help you understand what you can do to achieve a lightning-fast completion on your bridge loan.
There are a number of factors that will impact how quickly a bridging loan can be arranged. These include the:
- type of loan
- size of the loan
- extent of due diligence completed
- credit history of the borrower
- type of property being used as security
- location of the property being used as security
- amount of documentation required
- availability of funds from the lender.
Generally, if all the documentation is in order, a bridging loan can be arranged within a few days. However, if there are any complications or the lender needs to carry out additional checks, it could take longer.
It's important to bear in mind that the speed of arranging a bridging loan can vary significantly between lenders, so it's important to compare quotes before you choose a provider. We'll take a look at each of the factors that can impact the speed of getting a bridging loan.
The type of bridging loan
There are two main types of bridging loans: regulated and unregulated bridging finance. Regulated bridging loans are subject to more rigorous lending decision making in compliance with the Financial Conduct Authority (FCA) governance, so they can take longer to arrange.
Unregulated bridging loans don't have to comply with FCA rules, as such they are more flexible and the lender can choose to do less due diligence in order to mitigate delays, hence they can be arranged much more quickly.
The size of the loan
The size of the loan will also impact how quickly it can be arranged. Larger loans will take longer to process as the lender will likely choose to carry out more detailed due diligence. This helps the lender reduce or mitigate some of the uncertainties of the loan.
The extent of due diligence completed
Due diligence is the process of investigating a business or individual before entering into a financial agreement with them. The lender will carry out due diligence on the bridging loan applicant to assess their credit history and ability to repay the bridging loan. Whilst the extent of the due diligence will vary from lender to lender, it typically includes:
- property title and charge check
- property valuation
- applicant proof of identity and address
- applicant proof of income
- applicant proof of assets
- applicant credit history check (some lenders may not perform a credit check and only require a screen capture or downloadable credit report supplied by the borrower, obtained via an online service such as Experian or Equifax.)
In our experience, a lack of preparation by the borrower is a key reason why bridging loans can take longer to complete. Equally, failure to disclose at the outset all requested information regarding the property being used as security or the borrower’s financial circumstances will likely cause unnecessary delays.
Proof of income, proof of assets (other than the ones being proposed as security) and credit history are less likely to negatively impact a lender's decision on a bridging loan.
The credit history of the borrower
Whilst the borrower's credit history isn't likely to be the deal-breaker, poor credit history may mean the lender perceives more risk in the loan and therefore increase the rates or adjust the terms to reflect that.
The type of property being used as security
The type of property being used as security will very likely influence the bridging loan completion timeline, here's how.
When the property is residential: This is the most straightforward property type to lend against. If the residential property is: in a prime location, away from major trunk roads, of standard construction, in good condition and is unencumbered (without a mortgage or financial charge secured against it) then it will be very low risk for the lender. In this example, the lender may choose to complete a desktop valuation instead of an in-person valuation. This saves both considerable time and money and expedites the bridging loan turnaround time.
When the property is land: Again this can be quite a straightforward property type to lend against. If the land is classified as: residential or vacant land and buildings such as previously developed land which is now vacant, vacant buildings, derelict land and buildings; in a prime location, has planning in place with appropriate time to develop the land, the risk is low. These land types are the quickest for lenders to lend against because they represent less risk than agricultural, commercial or industrial land. You can read about different land classifications here.
What if the property is commercial or mixed-use? These property types are likely to require an in-person valuation and therefore this will add time to the process of obtaining a bridge loan.
The location of the property being used as security
Where residential property is located in close proximity to major trunk roads, motorways, institutions, landfill sites, waterways and similar factors, will increase the likelihood of an in-person valuation and therefore increase the timeline of the loan.
The amount of documentation required
The amount of documents that need to be completed by the borrower, or on behalf of the borrower, for a bridging loan will impact timelines. The minimum number of documents required are:
- Proof of identity & address
- Statement of assets & liabilities
- Application form (find out what questions will be on the bridging loan application form here)
- 2nd mortgage consent (where a 2nd charge is being applied to the property)
- Credit report (can be sourced from Experian or similar)
Availability of funds from the lender
In the current economic climate, and perhaps somewhat influenced by the £250bn quantitive easing programme the Bank of England has implemented over the past two years, there is a glut of funds available to lenders. As lenders have rapid access to funds available they're likely able to complete a bridging loan very quickly.
Each of these factors will impact how quickly a bridging loan can be arranged. As a general rule, if all the documentation is in order, a bridging loan can be arranged within a few days. However, if there are any complications or the lender needs to carry out additional checks, it could take longer.
It's important to bear in mind that the speed of arranging a bridging loan can vary significantly between brokers and lenders. If you'd like some tips on what to look for in a bridging finance broker, you can read this blog.