Bridging finance for property development

What is a development bridging loan?

A development bridging loan is a short-term, interest-rolled facility, usually running up to twelve months, that gives a property developer fast access to capital secured against a property or site. Its job is in the name: it bridges a gap, between buying a site and arranging development finance, between a deal needing to complete and a sale or refinance landing, or between an opportunity appearing and the slower money catching up. Speed and flexibility are the point, which is why a bridge is dearer than longer-term debt and is always meant to be repaid quickly.

A bridge is sized on the value of the security rather than on a build programme. The lender lends a percentage of the property value, typically up to around 70 to 75% loan to value, advances it as a lump sum, and takes its interest by rolling it up to be repaid with the capital at the end of the term. Because the loan rests on the asset and a clear exit rather than on construction progress, a bridge can complete in days to a few weeks, far faster than a full development finance facility. We arrange these bridges through our btr-bridging-finance service and model the cost on our /calculators/bridging-loan-calculator/.

What do developers use bridging finance for?

Developers reach for a bridge whenever speed or a gap in conventional funding is the constraint. The common uses share a shape: a short-term need, a clear exit and an asset to secure against.

Two of these matter most to a build-to-rent developer. Buying a site ahead of planning lets a developer secure land at a keener price and capture the uplift when consent is granted, with the bridge repaid from development finance once the scheme is ready to build. And a bridge used as development exit finance repays a development loan at practical completion and lowers the cost of carry while a build-to-rent scheme lets up to stabilisation, before a long-term refinance or sale. The bridge is the fast first or last link in the chain, with development finance doing the heavy lifting in the middle.

How bridging differs from development finance

The two are often confused, but they do different jobs. Development finance funds construction: it is drawn down in stages against certified build progress, sized on the lower of loan to cost and loan to GDV, and runs for the build plus a lease-up. Bridging finance funds a short-term need against an existing asset: it is advanced as a lump sum, sized on the property value, and repaid in months from a defined exit. A bridge does not fund a ground-up build; a development facility does not complete in a week.

In practice the two work together rather than competing. A developer often bridges the site acquisition, moves onto development finance to build the scheme out, then uses a development exit bridge to lower the cost during lease-up. Each tool suits a different phase, and the skill is in lining them up so the exit from one is the entry to the next. We arrange across both, so the sequence is planned from the outset rather than improvised at each handover.

What does development bridging finance cost?

A bridge is priced at a monthly interest rate rather than an annual one, reflecting its short term, and the headline rate is only part of the cost. On top of it sit an arrangement fee, commonly around 1 to 2 percent of the loan, plus valuation and legal costs and sometimes an exit fee. Because the term is short, these fees weigh more heavily on the all-in cost than they would on a multi-year loan, so they belong in any comparison.

Interest is usually rolled up and repaid with the capital at the end, which keeps the facility cash-neutral while it runs but means the balance grows over the term. Our /calculators/bridging-loan-calculator/ models the gross loan, the rolled-up interest and the net advance so a developer can see the true cost before committing. All figures are indicative, vary by lender and case, and never constitute an offer of credit.

How much can you borrow, and how fast?

How much a bridge lends depends on the security and the exit. A bridge against a standing property is typically sized up to around 70 to 75% loan to value, with the developer funding the balance. Where a bridge is used to buy a site for its planning gain, the lender lends against the current value, not the hoped-for value with consent, so the day-one advance is more conservative. A clear, evidenced exit, a sale, a refinance or development finance lined up to follow, supports a higher advance, because the lender can see how the loan gets repaid.

Speed is the bridge's defining feature. Because the underwriting rests on the asset value and the exit rather than a build programme, a bridge can complete in days to a few weeks where a full development facility takes longer. That speed is what wins auctions and secures sites before competitors. We keep the valuation, the legals and the exit evidence moving in parallel so the timetable holds. Where a bridge would be a regulated case, for example secured against a borrower's own home, we refer it to an authorised firm, because regulated bridging sits inside the FCA mortgage perimeter.