Commercial bridging in London: when it is the right answer, and when it absolutely is not

Bridging is a tool, not a product anyone should want for its own sake. The useful question is not whether it is expensive, because it plainly is. The useful question is whether the alternative is worse.

What it costs

Commercial bridging sits at 8.5 to 11.0% pa on the mid-2026 band, usually quoted as 0.70 to 0.95% per month. Add an arrangement fee of 1 to 2%, a valuation, legals on both sides and sometimes an exit fee.

Against term commercial mortgage debt at 6.0 to 8.5% pa, that is a substantial premium. A £880,000 bridge held for eight months at 0.82% per month costs roughly £58,000 in interest alone. That figure only makes sense if the bridge creates more than £58,000 of value.

The cases where it is right

Vacant possession purchase. No income means no investment mortgage. A vacant commercial building cannot pass an ICR test because there is no rent to test. If the plan is to acquire, refurbish and let, bridging is the only route to the starting line, and the acquisition price usually reflects the vacancy.

A deadline the term market cannot meet. An auction purchase, or a vendor with a fixed completion date shorter than a term lender's timeline. The premium buys the transaction, and the transaction is either worth it or it is not.

Light works before a term facility. Reconfiguration, a services upgrade, a shopfront, the works needed to make a building lettable to the occupier you already have in mind. Not major structural work, which is a different product family entirely and not one we place.

Chain break on a refinance. Where an existing facility matures before the replacement can complete, and the alternative is a default.

The cases where it is wrong

Because the accounts are not ready. A borrower who cannot yet evidence the trading history a term lender needs is not solved by bridging. They are twelve months closer to the same problem, having paid for the privilege.

Because a term lender declined. If a term desk said no on the merits, bridging does not change the merits. It changes the deadline.

Where a clean term facility would have funded. This happens more than it should, usually because the borrower went to a bridging broker rather than to somebody who places both. If the building has income and the borrower has accounts, price the term route first.

Without a documented exit. This is the one that causes real damage.

The exit is the deal

A borrower who takes a bridge and only then starts looking for term debt is exposed to whatever the market looks like in twelve months. That is where bridging cases go wrong, and it is entirely avoidable.

Arrange the bridge and the term facility at the same time, from the outset. The term-out is agreed in principle at acquisition, conditional on the thing you are actually going to do: a lease of a stated minimum length at a stated minimum rent, or a completed refurbishment to a stated specification.

That approach has a second benefit that borrowers underestimate. It changes the bridging lender's view of the case, because the redemption route is evidenced rather than hoped for, and evidenced exits price better than hoped-for ones.

A London worked example

A 6,800 square foot vacant Class E building in a South East London town centre, bought below the tone of the street because of the vacancy. £120,000 of works to reconfigure the ground floor and upgrade services. Two occupiers already expressing interest.

Bridge at 65% LTV against vacant possession value, 0.82% per month over twelve months. Term-out agreed in principle at the same moment, at 7.6% pa over a 25-year amortisation, conditional on a lease of at least ten years at a minimum passing rent.

Works complete at month four. Building let at month seven on a ten-year lease with a tenant break at year five. Term facility draws at month eight and redeems the bridge. Total bridging cost roughly £58,000 over eight months, against an asset that has moved from vacant and unfundable to income-producing and financed for twenty-five years.

That is what a bridge is for. Note that the exit was fixed before the first pound was drawn.

What we place and what we do not

We arrange commercial bridging and bridge-to-term, from desks including Shawbrook, LendInvest, InterBay Commercial, Together and Hampshire Trust Bank. We do not place ground-up construction lending, which is a separate product family with a separate lender pool, and we would refer that rather than pretend otherwise.

We also do not arrange regulated bridging, because it requires FCA authorisation and we do not hold it. Where a bridging case would be regulated, we say so on the first call and refer it to a regulated firm.

If you are weighing a short-term raise on a London commercial asset, send us the property, the works, the intended exit and the timescale. The first thing we will check is whether a term facility funds it outright, because if it does, the bridge is money you do not need to spend.