A bridge loan gives your business short-term funding to cover a gap, often while waiting for a longer-term source of finance or a sale to complete. They're designed to be temporary, and understanding that upfront helps you use them in the right way.

What a bridge loan is for

Bridge loans are typically used to cover a specific, time-limited gap, such as needing funds before a property sale completes, before a longer-term loan is approved, or between rounds of investment. They're secured against an asset, often property, which is why they're commonly used in commercial property transactions.

How they work

You borrow a lump sum for a fixed, usually short, period of time, often just a few months or sometimes up to a year or two, with a clear exit strategy agreed upfront, such as a property sale or refinancing onto a standard loan. Interest rates on bridge loans tend to be higher than standard business loans, reflecting the short-term, higher-risk nature of the lending, but the overall cost can still work out reasonable if the loan term is genuinely short.

What to check before taking one out

Because bridge loans rely on a clear exit plan, it's worth being realistic about whether that plan will actually happen on time:

•        How confident you are in your exit strategy, such as a sale or refinance completing on schedule

•        What happens if your exit is delayed, including any extension fees or increased rates

•        The total cost across the loan term, not just the monthly rate

•        Whether the security required, such as a charge over property, is something you're comfortable providing

Is a bridge loan right for you?

Bridge loans suit specific, short-term situations with a clear, realistic repayment plan. They're not designed as a general cash flow solution, and using one without a solid exit strategy can mean you end up having to pay high costs if the loan goes on longer than planned. If your need is more ongoing than a single, defined gap, a different type of finance is usually a better fit.