Can a new company get a bridging loan?

Tuesday 1st November 2022 | 3 minute read

Bridging loans are available to individuals and companies, this includes newly incorporated limited companies such as Special Purpose Vehicles (SVPs) and other UK legal entities.

So, yes, a new company can get a bridging loan - providing they meet this criteria.

While some lenders may have stricter criteria for lending to new companies, there are lenders who specialise in providing bridging finance to startups and new businesses.

However, it's important to note that the availability and terms of the loan will depend on various factors, including the financial stability of the company, the purpose of the loan, and the overall risk assessment conducted by the lender.

Two business men discussing finance

What's the criteria for a new company to get a bridging loan?

The most important factors to a lender when deciding whether they'll lend to a new company or not is two-fold:

Firstly, your property that you're offering as security.
Secondly, your exit strategy for the loan.

These are the critical aspects of a lender's criteria and will be most important to meet to ensure your loan sails through the bridging loan underwriting process.

Almost all other lending criteria that traditional banks or building societies use to determine your eligibility is less important.

Considerations for a new company seeking a bridging loan

Here are some important considerations for a new company seeking a bridging loan:

Business Plan and Viability: Lenders will assess the viability and potential of the new company. They may require a solid business plan that outlines the company's objectives, financial projections, and repayment strategy. Demonstrating a clear path to profitability and repayment will increase the chances of obtaining a bridging loan.

Security/Collateral: Bridging loans are typically secured against property or other assets. If the new company has valuable assets or property to offer as security, it can enhance the likelihood of loan approval. The value and quality of the security will play a role in determining the loan amount and interest rates.

Directors' Guarantees: In some cases, lenders may request personal guarantees from the directors or major shareholders of the new company. This provides an additional layer of security for the lender and increases the confidence in repayment.

Creditworthiness: Although new companies may have limited credit history, the personal credit history of the directors or major shareholders can be considered in the assessment process. Lenders may evaluate the creditworthiness of the individuals associated with the company to gauge the level of risk involved.

Specialist Lenders: Some lenders specialise in providing bridging finance to new businesses and startups. These lenders understand the unique challenges faced by new companies and may have more flexible lending criteria tailored to their needs. Exploring options with specialist lenders can increase the chances of obtaining a bridging loan.

It's important for new companies to carefully assess their financial position, consider the purpose and urgency of the loan, and evaluate the associated costs and risks. Seeking professional advice from brokers experienced in bridging finance can provide valuable guidance and help identify suitable lenders who are willing to work with new companies.

Who offers bridging loans to small businesses?

Several lenders offer bridging loans to small businesses. While the availability and terms of bridging loans may vary among lenders, here are some common types of financial institutions that provide bridging loans to small businesses:

Banks: Many traditional banks and financial institutions offer bridging loans to small businesses. These banks may have specific departments or teams dedicated to commercial lending, including bridging finance. It is advisable to approach banks where you already have an existing relationship or inquire about their small business lending options.

Alternative Lenders: Alternative lenders, such as online lenders, fintech companies, and peer-to-peer lending platforms, have emerged as alternative sources of financing for small businesses. These lenders often have streamlined processes and faster turnaround times compared to traditional banks. They may be more flexible in their lending criteria and provide bridging loans tailored to the needs of small businesses.

Specialist Bridging Loan Providers: Some lenders specialise in providing bridging loans specifically for small businesses. These lenders understand the unique needs and challenges faced by small businesses and offer specialised products and services. They may have a quicker application process and more flexible lending criteria compared to larger financial institutions.

Community Development Financial Institutions (CDFIs): CDFIs are nonprofit financial institutions that focus on providing financial services to underserved communities, including small businesses. They may offer bridging loans and other types of financing to support small business growth and development.

Business Finance Brokers: Business finance brokers act as intermediaries between small businesses and lenders. They have access to a wide network of lenders and can help small businesses find suitable bridging loan options. Brokers can assist in comparing different lenders, negotiating terms, and expediting the loan application process.

When seeking a bridging loan for your small business, it's important to thoroughly research and compare the offerings of different lenders.

Consider factors such as interest rates, repayment terms, fees and eligibility criteria. Consulting with business finance brokers specialising in small business financing can provide valuable guidance and help you navigate the process more effectively.

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