The UK property market is famously dynamic. Sometimes you need to move quickly to secure an investment property. Making sure you have the funds at hand is essential to enable you to take action.
The good news is that there is a range of financing options available to help you achieve your property goals. A Short-term business property loan can be a great way to secure your property quickly. These are versatile funding solutions that can unlock property for a range of buyers.
If you’re looking to invest in property and are looking for short-term financing to secure a deal, then a short-term business property loan may be the answer.
What are short-term business property loans?
A short-term business property loan is a flexible form of financing that can be used by businesses to purchase or refinance commercial properties. The loan is short-term and will typically be paid back over 12 months. They are usually used for specific short-term needs or opportunities. In many cases, they may be used as a short-term financing option while other longer-term financing options are secured.
A short-term business property loan can be used for various purposes such as purchasing, renovating, or refinancing properties. They give businesses the flexibility to move quickly, acquire property acquisitions and take advantage of time-limited investment opportunities.
A short-term business property loan can be approved and funded much quicker than other types of property finance, giving them a key advantage when it comes to seizing time-sensitive opportunities.
Typically, a short-term business property loan will have a higher interest rate than a longer-term property loan. However, it’s important to remember that because the loan is being paid back over a shorter period of time, the overall amount of interest repaid is likely to be considerably less.
Short-term business loans can have flexible repayment structures that may combine regular monthly payments with a larger final payment at the end. Others may be structured so that only the interest is paid during the duration of the loan, with the balance being paid back at the end of the term.
Is a short-term business property loan right for me?
If you’re considering a short-term business property loan it’s essential to consider if this form of finance is right for you. Firstly, it’s important to think about why you require a short-term business property loan and whether or not it’s going to be the most suitable form of finance for your needs.
You should also have a plan for repaying the loan. This is particularly important if you choose an interest-only repayment plan which requires you to pay the loan amount in full at the end of the term. A well-defined exit strategy may involve selling the property, refinancing with a long-term mortgage, or using other financial resources.
It’s essential that you carefully consider the financial situation of your business and the specific objective you may have for the property when deciding if a short-term business property loan is suitable.
Can you get a short-term loan to buy a property?
Short-term property loans are growing in popularity in the UK. Sometimes known as bridging loans, they provide fast access to funds for property purchases where traditional mortgage financing may not be practical or available. They are a form of interim financing that will typically be secured against a property, and as the name suggests, they have a shorter repayment period.
If a property purchase needs to happen quickly, short-term property financing is often the most sensible option. They can be particularly helpful in highly competitive property markets like the UK where buyers need to act fast to seize available opportunities. This can often be the case in investment and commercial property purchases.
Property developers may also use a short-term business property loan to purchase a property in need of renovation. They will then renovate the property, and either sell it to repay the loan or refinance it with a long-term mortgage.
Property sales at auctions will often require immediate payment. Property bridging loans enable successful bidders to complete the purchase and then secure longer-term financing.
Short-term business property loans are also sometimes used when a buyer needs to complete a purchase while awaiting the sale of their own property, or if a chain breaks. These are more commonly used in the residential market than with commercial property purchases.
If you’re looking to secure a commercial property for development, renovation or resale, then a short-term business property loan can help you achieve your goals.
What are the types of short-term property loans?
If you need to quickly secure finance to complete a property purchase, then a short-term business property loan may be the answer.
What options are available when it comes to short-term property finance for commercial purchases
Bridging Loans
A Bridging Loan is so-called because it bridges a short-term funding gap. This makes them ideally suited for financing property purchases and investment projects. They will usually be repaid quickly, with the property buyer selling the property after renovation or securing another finance project, such as a mortgage, over a longer period of time.
While property bridging loans were originally designed to bridge any gaps during a property chain, they can now be used more flexibly for various purposes. A bridging loan can be secured on the property you hope to purchase enabling you to arrange funding quickly. This then gives you time to search for longer-term financing if it’s required.
Bridging loans can be used to purchase property that requires renovation which may be less attractive to traditional lenders. In many cases, a bridging loan may be used to finance both the purchase of the property and its renovation.
Because of their flexibility and speed, bridging loans are a popular form of short-term business property loan for a range of commercial property purchases, buy-to-lets, offices, renovation projects, offices, retail properties, factories and warehouses.
Auction Finance
Auctions are a great way for both residential and commercial buyers to purchase great value property. They can provide an entry into the market and will often feature properties that might otherwise be difficult to sell. They could be in poor condition, have previously been used for industrial or other purposes, or may have been repossessed by the lender due to mortgage arrears.
Property auctions are also a way for investors to build up a property portfolio at a reasonable price, or for developers to purchase cheap property in need of significant renovation which can then be resold for a profit.
The big disadvantage of an auction purchase is that potential buyers need to have the finances in place prior to placing a bid. Due to the sums involved, this can prove challenging, particularly if your capital is tied up in existing property you own.
If you’re the winning bidder, a deposit is immediately required to secure the property. In most cases this will be around 10%. The remaining balance along with any fees will then need to be paid within 28 days. Failure to provide the required funds within the expected timescale may result in the property being lost.
Auction finance can address this issue enabling a wider pool of would-be buyers to bid at auction. This is a form of short-term business property loan that enables you to bid with confidence and complete an auction purchase.
Auction finance can be arranged within hours and the funds released within 72 hours. Bidders can receive an agreement in principle before they attend the auction, enabling them to bid with confidence.
Interest-Only Commercial Mortgages
An interest-only commercial mortgage allows the borrower to pay off the interest on the loan amount each month with the full amount becoming due at the end of the loan term. This will usually be when the property is sold off or another type of funding is available. These are flexible forms of short-term business property loan that can be used to finance everything from small-scale renovation projects to large developments.
Because of the set-up fees for a Commercial Mortgage, it can be uneconomical to borrow smaller amounts. Commercial mortgages are usually available as tracker, offset or fixed-rate options.
What are the criteria for a short-term business property loan?
Different lenders will have different criteria for assessing an application for a short-term business property loan. Because of the timescales involved, most will reach a decision quickly, enabling businesses to complete the purchase or find another funding source.
As with other types of business loans, the lender will look at your financial situation, personal or business income, personal or business assets, credit history and plans for the property. They may also wish to consider your own experience and whether you’re acting as an individual, partnership or limited company. Bear in mind that a larger deposit can make it easier to secure a short-term business property loan.
Are business property loans flexible?
Although the loan will be secured on the purchase of the property and its likely resale value, the money can usually be used for any purpose. That means that if you can finance the actual purchase through other means but require funds to complete the renovation, then a short-term business property loan may be a solution. This gives property investors flexibility in how they spend the money as long as the terms of the loan are met and the borrowed money is paid back at the end of the term.
What are the terms of a business property loan?
The terms for a business property loan will differ depending on the lender, the amount being borrowed and how it is being repaid. In most cases, short-term loans will need to be repaid within 12 months.
Because of the variety of short-term business property loans available it’s advisable to work with business finance experts who understand the market and can quickly identify the right product and lender for you.
Short-term business property loans with Business Finance House
At Business Finance House, we help businesses achieve their commercial goals. If you’re looking to invest in property, take on a development project, or are looking for finance to bridge a gap in a commercial property chain, then we can help.
We take time to find out more about your plans and what you hope to achieve. We consider your particular circumstances and then provide impartial advice about what may be the most suitable way to proceed.
As we work with 80 lenders, we can find the most appropriate loan for your specific circumstances. Whether you’re looking for a bridging loan, auction finance or a short-term interest-only mortgage, we find a flexible solution that matches your requirements.
With a wealth of experience, our expert team is on hand to help you find the right funding solution for your commercial property purchase.
Why not contact us today to find out more and to discuss your options?
