How to Get a Bridging Loan in Scotland

The commercial property market in Scotland is growing, seeing results in 2024 that were 16% above the five-year average, which means speed is of the essence when it comes opportunities. That’s where quick, short-term funding solutions like bridging loans are essential. Whether it’s for property transactions, refurbishments, or a new business venture, a bridging loan can provide fast access to capital to cover – or bridge – a cash flow gap and keep your project on track. In this article we’ll look at how to get a bridging loan in Scotland.

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What Are Bridging Loans?

Bridging loans are short-term financing solutions designed to cover – or bridge – temporary funding gaps. Commonly used in property transactions or business cash flow management, these loans offer speed and flexibility.

What you need to know

• Loan Amounts: Typically ranging from £25,000 to £250 million.
• Loan-to-Value (LTV): Up to 80%, or 100% with additional collateral.
• Loan Terms: Usually between 1 and 24 months.
• Interest Rates: Start from 0.44% per month​​.

Why is Using Bridging Loans Popular in Scotland?

Scotland’s property market is highly dynamic, with the market hitting record highs in 2024. This means that it offers unique opportunities, including urban investments in cities like Glasgow and Edinburgh, rural developments in the Highlands, and niche markets such as land purchases. 

Bridging loans cater to the specific needs of this market by offering:

• Accessibility to auction purchases: Quick access to funds helps secure competitive bids in a fast-moving scenario.
• Unmortgageable properties: Renovation of properties deemed unsuitable for traditional financing to bring them up to market-worthy condition.
• Land purchases: Including acquisitions without planning permission.
• Business opportunities: Immediate liquidity to capitalise on time-sensitive deals​​ or urgent repairs.

How do Bridging Loans Work?

Given their shorter durations, bridging loans work differently to commercial mortgages, even though they both relate to property. Bridging loans are designed to cover funding until a longer-time finance product can be arranged, or the property sold. 

• Costs are structured for the short term, with interest quoted as a monthly instead of an annual figure, since the idea is that you’ll pay it back in less than a year.
• After the ‘minimum loan period’ expires, interest is often charged daily, meaning that if you repaid after, say, 5 weeks, you’ll be paying for just that term, rather than rounding up to two months. 

Bridging loans are secured against an asset, usually a property or land. Here’s how they typically operate:

1. Application: Borrowers submit details of their financial need, the asset being used as security, and an exit strategy.
2. Assessment: Lenders evaluate the asset's value and the repayment plan.
3. Approval: Once approved, funds are disbursed quickly—often within days.
4. Repayment: The loan is repaid through property sales, refinancing, or other means​​.

Advantages of Bridging Loans in Scotland

Bridging loans are tailored to meet time-sensitive and complex financing needs. Here’s why they stand out:

• Speed: Funds can be released in as little as 7 days.
• Flexibility: They accommodate diverse scenarios, from property development to business liquidity.
• Accessibility: More lenient criteria compared to traditional lenders.
• Customisation: Terms are adapted to individual circumstances​​.

Supplier Comparison: Bridging Loans in Scotland

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How to Get a Bridging Loan in Scotland?

Here’s a step-by-step process to make your bridging loan journey smooth and stress-free:

1. Evaluate your needs

• Define the purpose: auction purchase, development, or business liquidity.
• Calculate the amount required and determine the security (e.g., property, land).

2. Choose a lender

• Refer to the comparison table above to shortlist lenders offering suitable terms.

3. Prepare documentation

• Property valuations.
• Proof of ownership.
• Exit strategy details (e.g., refinancing plans or sale timelines).

4. Calculate the costs

• Account for arrangement fees, valuation costs, and legal fees.

5. Apply and access funds

• Complete the application and await approval. Some lenders can process and disburse funds within 7 days​​.

Alternatives to Bridging Loans

While bridging loans in Scotland can provide fast access to finance, they also bring their own risks and challenges. Once you have taken out a bridging loan, it’s essential to have a plan for repaying it quickly, otherwise interest can quickly add up.

For finance that combines speed with flexibility and control, over 90,000 SMEs have chosen an iwoca Flexi-Loan, which offers rapid access to funds alongside terms that can adapt to your needs and circumstances.

• Flexible loan amounts: Borrow between £1,000 and £1,000,000, depending on the nature of your project. Plus, you can top up your loan once you’ve repaid a certain amount, in case you need more funding.
• Customisable repayment terms: Repayment periods range from 1 day to 60 months, and you can overpay or repay early with no fees.
• Fast funding: Get approved within hours and have the funds deposited into your account as quickly as the same day, helping you seize opportunities as they arise.
• Fair pricing: iwoca offers clear, upfront pricing with no hidden costs, so businesses know their costs from the outset.
• Interest on outstanding balance: Interest is only charged on the outstanding loan balance that you draw down, not the entire loan amount, helping you control your costs.

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FAQs on Bridging Loans in Scotland

1. What can a bridging loan be used for?

Bridging loans are versatile and can finance property purchases, renovations, business liquidity, and auction acquisitions​​, provided the asset in question is of sufficient value and you have an exit plan.

2. How quickly can I secure a bridging loan?

Bridging loans are built for speed, and most lenders disburse funds within 7 days, with some offering same-day approvals​​.

3. Are there credit checks involved?

Since bridging loans are a kind of secured loan, with the loan secured against the property, any lenders focus on the asset and exit strategy rather than your personal or business credit history​.

4. What are the risks of bridging loans?

Like most short term finance products, bridging loans come with higher interest rates which mean it’s important to have an exit strategy. You should have a clear idea of how you’re going to generate the capital to repay the loan in a reasonable time – usually less than 12 months – through alternative financing, selling the property in question, or selling another property to finance the one on which you’re working.

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