All bridging loans are unique, with terms and conditions tailored to meet the requirements of the borrower. Lending criteria can also vary from one provider to the next, as some are much more flexible than others with regard to who they will work with.
Applications are assessed by way of individual merit, taking into account a wide variety of factors. With bridging loans, for example, a good credit history is not always a prerequisite for eligibility. Neither is formal proof of income, as would be necessary with a conventional loan or mortgage.
Irrespective of the size and preferred repayment term of the facility, several key criteria can affect eligibility and/or the affordability of the loan offered. You can therefore expect most bridging lenders to take the following into consideration when establishing your eligibility and calculating costs:
Age of the Applicant
Bridging finance is exclusively available to applicants aged 18 years or over. Most lenders also impose an upper limit, but it tends to be much higher than with a standard loan or mortgage. As bridging finance is almost always repaid within six months to two years, it can safely be issued to older applicants.
It is usually a requirement for bridging loan applicants to reside in the UK, or at least have a registered UK address. However, there are some lenders who also specialise in bridging finance for overseas applicants, looking to make purchases and investments in the UK.
The single most important eligibility requirement, you must be able to provide assets of value as security for the loan. Most bridging loans are secured against property (residential or commercial), but lenders will often accept other viable assets – business equipment, machinery, vehicles, etc.
Also important is the provision of evidence regarding a viable exit strategy. This means how and when you intend to repay your loan, complete with due diligence regarding all possible contingencies. The more viable the exit strategy of an applicant, the higher the likelihood they will qualify for an affordable bridging loan.
A poor or unestablished credit history will not necessarily count you out of the running for bridging finance. However, the most cost-effective loans with the lowest borrowing costs are typically reserved for clients with a strong credit profile. If you have any questions or concerns regarding your credit history, they should be raised with your lender before applying.
Loan Type Required
Some bridging finance companies will offer loans to private customers and business borrowers for all purposes. Elsewhere, others restrict their services exclusively to commercial customers. There are typically no restrictions placed on how bridging finance can be used, but the allocation of loans to different types of customers varies from one lender to the next.
General Financial Status
Adequate security and evidence of a viable exit strategy are typically enough to qualify for bridging finance. However, your lender will also want to know that you are in a generally strong financial position at the time. If, for example, you already have a long list of existing debts and outgoings, you may find it more difficult to qualify.
LTV and Loan Term
The size of the loan you take out, its LTV and the length of the repayment term will also influence the affordability of the facility. Higher-value loans and those taken out at a higher LTV are more difficult to qualify than comparatively low-value loans. Likewise, a bridging loan that can be repaid as promptly as possible may be easier to obtain than a loan you plan to repay after around two years.