The Client
The clients are first-time landlords, though they jointly own their own residential property between them. They recently set up a Special Purpose Vehicle (SPV) company to acquire investment properties, and this is their first project through it. There are three directors and shareholders in the SPV, none of whom have any renovation experience.
The Scenario
This scenario had several things to consider:
- The property was being purchased at auction, meaning a strict 28-day time constraint to complete.
- The limited company had just been set up and had no trading history or accounts.
- Many lenders will only accept an SPV company with a maximum of two directors or shareholders.
- The clients had no experience as landlords or in renovating a property bought at auction.
- This was a light refurbishment with no structural works needed. The clients wanted to purchase using the bridging loan and borrow 100% of the funds needed for the refurbishment works.
The Solution
As a whole-of-market bridging loan broker, we know from experience that not every bridging lender insists on previous investment property experience, and that the clients already owning their own residential property helped their case.
We secured a bridging lender able to complete within the 28-day auction deadline. The newly set-up company was not a problem either, since it was an SPV established for the sole purpose of holding and renting property. The three-director structure was also not an obstacle – while many lenders cap SPV borrowers at two directors or shareholders, we placed this case with a lender comfortable with up to four.
The clients having no renovation experience did rule out some lenders, but we know several that will still lend as long as an experienced contractor carries out the works.
A bridging loan will typically lend 60% to 70% net on the purchase price, though some lenders will also cover 100% of the refurbishment costs. In most cases, refurbishment funds are released in arrears, which means the client needs to cover the first stage of works from their own funds before being reimbursed. Refurbishment bridging loans carry their own set of timing and cost risks worth understanding before work begins.
Summary
It is possible to secure lending on complicated setups and situations that would look undesirable to most lenders.
Key things to consider for bridging loans:
- Some bridging lenders will accept newly set-up companies
- Some bridging lenders will work to a time frame that suits auction completion, typically 28 days
- Up to four directors or shareholders on a company is acceptable to some lenders
- No renovation experience is acceptable, as long as an experienced contractor carries out the works
- 100% funding for refurbishment works is available from some lenders
Frequently Asked Questions
Can a newly set-up SPV company get a bridging loan?
Yes, provided the company was set up for the purpose of holding or renting property.
Lenders assess an SPV differently to a trading company, so a lack of accounts or trading history is not automatically a barrier.
How many directors or shareholders can an SPV have for a bridging loan?
This varies by lender, and many cap it at two.
Some lenders will consider up to four directors or shareholders, so it is worth checking lender criteria before assuming a larger ownership structure will be a problem.
Can I get a bridging loan with no landlord or renovation experience?
Yes, though some lenders will decline on this basis alone.
Others will lend as long as an experienced contractor is appointed to carry out the works.
Can a bridging loan cover 100% of refurbishment costs?
Some lenders will fund up to 100% of the refurbishment works.
Funds are typically released in arrears against completed stages, so the client usually needs to cover the first phase of work before being reimbursed.
Commercial Finance Network is a whole-of-market FCA authorised commercial finance broker working with property investors, developers, and businesses across the UK and internationally. We work across the full specialist bridging panel and will tell you which lenders will engage with your deal, what LTV and rate to expect, and how to structure the application before anything is submitted.
Commercial Finance Network is directly authorised and regulated by the Financial Conduct Authority. Your property may be repossessed if you do not keep up repayments on a loan secured against it. Buy-to-let and business-purpose lending secured against investment property is not regulated by the Financial Conduct Authority.
Call us on +44 1494 622 111 or email info@cfnuk.com to speak to a specialist directly.
Related Pages
- Bridging Loans – fast, flexible funding secured against property for purchases and refurbishment
- Auction Finance – completing property purchases within tight auction deadlines
- Bridging Loan Calculator – estimate monthly interest and total borrowing costs
- Bridging Loans for Refurbishment Projects – where refurbishment bridging finance commonly goes wrong
- Bridging Loan Requirements – what lenders actually look for before approving a case