In What Situations Would a Business Consider Using Bridging Finance?

Bridging finance has become a popular source of funding for businesses as a way to bridge the gap between the purchase and sale of something. With short term durations of around 12-24 months, bridging has become popular as a way of purchasing property, stock or taking advantage of growth periods.

The industry gained momentum after the credit crisis around 2008 and private lenders and small banks started to offer bridging finance to borrowers and companies when they realised that banks were being more restrictive with their lending criteria. Being more independent and non-banks, bridging often is associated with faster decision making and turnaround times, with funds processed in days or weeks, rather than months.

In Q1 2025, 23 percent of bridging loans were taken out for investment purchases, reflecting how many firms use short-term funding to seize market opportunities. Bridging finance can be a vital tool when timing is critical or traditional loans are too slow. Below are common scenarios where businesses might turn to this option.

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Bridging finance is a short-term loan, typically secured against property or other assets. It runs for a fixed period, often up to 12 months, and is designed to fill a funding gap (Source: MT Finance). Lenders may take a first or second charge on the collateral, and interest is usually settled monthly. Because of this structure, bridging loans can be arranged far more quickly than standard business or property mortgages.

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A business might need bridging finance when a quick payment is essential. For example, a company bidding on a property at auction cannot wait weeks for traditional mortgage approval. Bridging finance allows an immediate purchase, often within days. Similarly, firms may have unexpected costs—such as urgent repairs, tax bills or a sudden opportunity to acquire stock at a discount—that require funds faster than a bank loan can provide.

Property developers often use bridging loans to start renovation or conversion projects before longer-term finance is arranged. This “open” bridging loan gives developers time to complete work, obtain planning permission and secure a development mortgage. It removes timing risks, such as missing a planning deadline or losing a project to a competitor. In a market where delays can be costly, bridging finance keeps projects moving.

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Some businesses use bridging loans to unlock equity tied up in property. For instance, a company may own a premises outright but lack the cash to fund growth. A bridging loan secured on that building can free funds to hire staff, invest in marketing or launch a new product line. Unlike overdrafts or unsecured credit, this approach leverages existing assets in a controlled way.

Bridging finance carries higher interest rates and fees than conventional lending. Businesses must have a clear exit strategy, such as sale of the property, refinancing with a mortgage or generating enough cash from operations to repay the loan. Failure to repay on time can lead to repossession of the secured asset. It is essential to compare lenders, check all costs, and ensure monthly payments fit the budget.

Bridging loans are not a long-term solution. Companies expecting to hold debt for more than 12 months should seek other finance. If a business lacks a reliable repayment plan, the risk of default is too high. In stable markets with predictable cash flow, firms may be better served by traditional bank loans or overdraft facilities.

Bridging finance can be a powerful tool when speed and flexibility matter. By understanding its costs and structuring a solid repayment plan, businesses can use bridging loans to seize time-sensitive opportunities, smooth cash flow gaps and fund growth initiatives.

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