The Complete Guide to Bridging Loans for UK Businesses (2026)

What is a bridging loan?

A bridging loan is a short-term, secured loan designed to bridge a gap in funding. It is almost always secured against property and typically runs for one to 24 months. The name reflects the original use case: bridging the gap between purchasing a new property and selling an existing one. However, modern bridging loans are used across a much wider range of situations.

Unlike a standard mortgage or business loan where you make monthly interest and capital repayments, most bridging loans allow interest to be rolled up (added to the loan balance) and repaid at the end of the term along with the capital. This means no monthly payments during the loan term, which suits scenarios where cash flow is tied up in the project being funded.

Bridging loans are valued for their speed. While a mortgage typically takes six to twelve weeks to complete, a bridging loan from a specialist lender can complete in as little as five to ten working days. In competitive property markets or time-critical scenarios, this speed is often the deciding factor.

When is a bridging loan the right solution?

Property purchase at auction is one of the most common use cases. Auction purchases require completion within 28 days, which a mortgage cannot achieve. A bridging loan provides the funds in time and is then repaid when the property is refinanced or sold. Experienced property investors use bridging routinely for this purpose.

Property refurbishment and development is another major use. If a property is uninhabitable or derelict, high street mortgage lenders will not fund it. Bridging lenders specialise in funding properties in any condition, with the exit route being refinancing to a buy-to-let mortgage or sale of the completed property once works are finished.

Businesses use bridging loans to purchase commercial premises before their existing facility has sold, to fund a business acquisition where speed is essential, to release equity from property quickly for working capital purposes, or to replace a chain break in a property transaction. Any scenario where you need fast, secured funding and have a clear repayment route is a potential bridging loan use case.

Open vs closed bridges, and first vs second charge

A closed bridge has a defined exit date, typically tied to a specific event such as a confirmed property sale or a mortgage offer already in hand. Closed bridges carry lower rates because the exit risk is reduced. An open bridge has no fixed exit date and is used when the timing of repayment is uncertain. Open bridges are more flexible but priced higher to reflect the additional uncertainty for the lender.

A first charge bridging loan is the primary (and only) charge on the property. A second charge bridge sits behind an existing mortgage or charge. Second charge bridging rates are higher because the second charge holder takes on more risk: if the property is repossessed and sold, the first charge holder is repaid first. Second charge bridging is useful when you do not want to disturb an existing mortgage on favourable terms.

What does a bridging loan cost?

Bridging loan interest is usually quoted monthly rather than as an APR, because terms are short. Rates in 2026 typically range from 0.55% to 1.5% per month, depending on the loan-to-value (LTV), the property type, the borrower's experience and credit profile, and whether the bridge is open or closed. A rate of 0.75% per month equates to approximately 9% per annum, but compounding applies for rolled-up interest facilities.

Arrangement fees are typically 1-2% of the gross loan amount, payable on completion. Exit fees (charged when the loan is repaid) range from 0% to 1% depending on the lender. Legal fees are payable by the borrower and cover both the lender's solicitors and your own. Valuation fees are also payable upfront. Always model the total cost of the bridge including all fees, not just the interest rate.

For a rolled-up interest bridge, the loan amount repaid at exit will be higher than the initial advance. For example, a £500,000 bridge at 0.75%/month for 12 months with 2% arrangement fee would result in a gross redemption figure of approximately £570,000 (including rolled interest and fees). Make sure your exit route generates enough to cover this amount with a comfortable margin.

Exit routes: the most important part of any bridging loan

Every bridging lender will ask for your exit route before lending. The exit route is your plan for repaying the bridge at the end of the term. The two most common exit routes are sale of the property (including property being bought to refurbish and sell) and refinancing to a longer-term mortgage or commercial loan once the property is habitable, tenanted, or the business situation has stabilised.

A credible exit route must be realistic and achievable within the loan term. Lenders will challenge weak exit strategies. If your exit is a mortgage refinance, get an agreement in principle in place before completing the bridge. If your exit is a property sale, consider whether the market timescale allows for completion within your bridge term, and factor in a buffer.

Where an exit route fails or is delayed, most bridging lenders will consider a term extension, though extension fees apply (typically 0.5-1% of the loan value per month of extension). Building time into your initial term is advisable. A 12-month bridge is often sensible even for a project you expect to complete in eight months.