Non-Regulated Bridging Can Benefit Borrowers, Brokers and Lenders

By Tony Gilbertson, CEO, Signature Property Finance

As a lender specialising in non-regulated bridging and development finance, I’ve seen how this type of funding can benefit everyone involved – the investor, the broker, and the lender. Yes, it may be more expensive than some other forms of finance, but that isn’t the full story. The real measure is whether it allows you to seize an opportunity and generate greater returns as a result.

What Is Non-Regulated Bridging Finance?

Non-regulated bridging is anything done for business purposes – in other words, where the aim is to make a profit. It is widely used by property developers and landlords, and one of the clearest examples of its value is in auction purchases.

Why Speed Matters in Bridging Finance

When the hammer falls at an auction, contracts are exchanged and the buyer typically has just 21 to 28 days to complete. Unless a buy-to-let mortgage has been arranged in advance – and even then, not always – it is unlikely that a traditional lender can release funds in time.

Bridging lenders are built for these timescales. At Signature, for example, we employ in-house lawyers and work with valuers who understand the need for speed. In some cases, we can use desktop valuations to avoid a physical inspection, cutting days from the process. These efficiencies mean that we can hit auction deadlines and other tight completion dates.

Understanding Costs Versus Returns

The cost comparison between bridging and longer-term finance can be misleading. A bridging loan may cost more in interest, but if it enables the purchase of a property at a 20% discount – or allows an investor to complete a project that will return a much higher profit – the overall benefit is clear. It might mean spending £5,000 more on finance to make an extra £50,000 on the deal. That’s why comparing the rates on a bridging loan and a buy-to-let mortgage directly is like comparing apples and pears.

How Interest and Structuring Work in Bridging Loans

From a structuring perspective, many borrowers choose retained or rolled-up interest, which means they don’t have to make monthly payments during the term. This can be particularly helpful while refurbishment work is underway and the property is not generating income. Others may opt to service the interest monthly to maximise their loan-to-value. In either case, the key is to make sure the term of the loan is realistic for the project – long enough to complete the work and achieve the planned exit.

Planning the Exit Strategy for Bridging Finance

That exit is critical. We would never put someone into a bridging loan without a clear path to getting them out of it. Sometimes the plan will be to sell after adding value, and other times it will be to refinance onto a term facility. We work closely with introducers to ensure the exit is achievable. Even without a formal offer in place at the outset, if a trusted broker can show they have an agreement in principle and a viable route, that’s enough for us to move forward.

Opportunities for Mortgage Advisers

For mortgage advisers, this is an area where just a little knowledge can make a big difference. You don’t need to be a bridging expert to spot an opportunity. Asking a couple of key questions can reveal whether this type of finance could help a client secure a deal and increase their profit.

A Win-Win Outcome for Developers, Brokers and Lenders

When bridging works well, it’s a win for everyone. The developer gets to complete on a property quickly and realise the opportunity. The adviser earns from the bridging arrangement and, later, from arranging the term finance. And for the lender, a successful deal builds long-term relationships with both the broker and the borrower. If all three parties benefit, everyone is motivated – and that’s when the best outcomes are achieved.