Bridging loans for self-employed

This type of loan may sound like an easy solution, but there is a lot to know about bridging loan eligibility when you are self-employed.
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    Bridging Loans for Self-employed Professionals

    Whether you are a sole trader or self-employed, it may seem daunting to consider the prospect of authorised and regulated loans or even a bridging loan. This is not uncommon since for so long, being self-employed was considered a niche way of making a living. But with the onset of the Covid-19 pandemic, what was once considered a niche sector of the workforce is now very common place indeed.

    Did you know that as a self-employed individual you can qualify for bridging loans? In fact, a bridging loan can come in handy if you are self-employed and temporarily facing cash flow issues or you are running into roadblocks with mortgage lenders and you wish to acquire a home.

    This type of loan may sound like an easy solution, but there is a lot to know about bridging loan eligibility when you are self-employed. Things like financial status, business accounts, interest rates, and other debt oriented parameters should all be considered carefully before securing bridging finance secured loans.

    Bridging loans can often be a complex form of finance, which is why we are here to help give you advice and a broad overview of the process. And, when you are ready, and if you think a bridge loan might be right for you, then contact us and we will be happy to discuss your needs and answer all of your questions.

    Reasons to get a self-employed bridging loan

    There are surprisingly numerous reasons why a self-employed individual may consider bridging finance. These include the ability to bypass mortgage brokers, raise funds for a house purchase or property refurbishment, or the ability to consider acquiring commercial property, and much, much more.

    Being self-employed can sometimes make it difficult to secure loans, since bank statements and a tax bill are some of the only ways to prove income.

    But bridging finance is regulated by the Financial Conduct Authority, which means the ability to secure long term finance options over a designated loan period are permissible as long as a self-employed individual meets certain eligibility guidelines ( more on this below ).

    Remember, a self-employed bridging loan can be used for:

    • Buying a house at auction
    • The purchase of office space or other premises
    • The purchase of large items at bulk prices to prop up your sole trader business
    • To resolve any cash flow problems to allow you to get ahead

    Should I get a self-employed bridging loan?

    You should most certainly consider a bridging loan if you are self-employed and need to secure finance fast. Quite often their is a misconception that the nature of your work and income is an arbitrary barrier to securing much needed cash but this doesn’t have to be the case.

    A bridging loan does just that- it bridges the gap between shortfalls in some popular forms of financial loan arrangements by providing affordable and manageable repayments after you secure your loan to fulfil your financial or purchasing needs.

    What forms of income proof do I need to provide?

    You will need to provide proof of your financial purview. You will need at least 1-2 years of business accounts so we can see that your business is profitable and consistent.

    Ultimately, it will depend upon the overall profitability of your business with consistency being one of the main factors taken into consideration. For example, startups are typically viewed as exciting new business prospects, and this may mean that less than a year of financials may be permissible.

    A bridging loan prioritises affordability, and you should have a solid exit strategy in place to take advantage of the benefits that bridge loans can provide.

    What is the eligibility criteria for a self-employed person?

    Proof of income is all you really need when applying for a bridging loan. A risk assessor will take a look at your application to better inform the assessment process in relation to those who are self-employed.

    Sole traders, partnerships, or even directors of limited companies are all welcome to apply in terms of eligibility.

    How much does a self-employed bridging loan cost?

    As with any loan, bridging comes with its own set of interest and fees. As previously stated, interest rates will be lower and affordability is prioritised.

    Some lenders may add charges such as administration fees, early exit fees, valuation and legal. This all depends on the terms and conditions of your borrowing agreement.

    For more information, take a look at this in-depth guide to bridging loan costs.

    What are the criteria for bridging loans?

    Firstly, you may want to consider if you’re eligible for a bridging loan as discussed above. You may be required to have proof of a previous property, to put up as collateral, to prove you are able to pay the loan back, which is where we can look at your financials and determine if other assets can suffice the security of the loan for self-employed individuals.

    When you choose Bridging Options, it’s as simple as either completing a quick form online or calling up to answer some brief questions. As well as the usual basic details, you may also be required to give the following information:

    – Amount you wish to borrow
    – Property price
    – New purchase price
    – Potential exit strategy
    – Current income

    After this has been processed, you should hear back within 24 hours as to whether you have been successful.

    The next step will only take a few weeks to send any relevant documents to prove income etc. and for your current property to be valued or collateral appraisement finalised. After this has been completed then the money is ready to be transferred.

    Are bridging loans based on income?

    Bridging loans are based on affordability and are only intended for short term financing and lenders will expect you to pay in full at the end of the agreed timeframe (usually within 18 months). Therefore, as long as you have clear intentions from the start and an exit strategy in place that the lender is aware of, there shouldn’t be any problems in settling the loan.

    In many ways, this reduces the need to make monthly payments, which gives you ample time to secure what is needed to better enhance your business.

    It is important to remember, however, that the fees associated with the bridging loan are usually deducted prior to the money being paid over to you. For example, if you agreed to borrow 100,000 pounds and your fees were 3,000 pounds then you would expect to receive 97,000 pounds as the net advance.

    Interest rates would be applicable to the total loan value and exit fees are generally added at the end.

    Are bridging loans debt secured?

    Bridging loans are secured against either a property or some kind of acceptable asset. So this means that debt or bad credit are typically not roadblocks to securing this type of loan.

    This is what makes bridge loans such a worthwhile investment to consider since you will only typically have to worry about repayment at the end of the term as opposed to monthly.

    Should I do a mortgage or secured loan?

    This ultimately depends on you and what option seems more attractive. A mortgage comes with many strict parameters that must be met when you are looking to finance a property. Bridge loans are much more lenient since you can take advantage of purchasing the property you have your eyes on and worry about the loan repayment after a term has passed.

    Bridge loans are certainly a better option if you have a poor credit score, and in many ways, a secured bridge loan is better for those who are self-employed.

    Need Specialist Advice?

    Complete the form to arrange your initial free phone consultation with our bridging loan specialist:

    Commercial Loans

    Commercial bridging loans offer a short-term funding solution for businesses, landlords, property developers and land owners in the UK.

    Residential Loans

    Residential bridging loans are a popular and useful form of property finance, but at Bridging Options, we appreciate that comparing different rates and terms can be complex and confusing.

    Development Loans

    Development finance offers short-term funding to those who need help with the purchasing and/or building costs of a construction project.

    Residential bridging loans we can help with…

    Our advisers have access to the best commercial bridge mortgage loans in the market and will be able to guide you through the process, application, and securement of bridging finance. Contact our team today for free bridging advice.

    Why choose Bridging Options for your Self-employed bridging loan?

    At Bridging Options, we know how important it is to secure financial services when you are in a bind. Bridging loans are a mainstream and common tool that you can use to ensure you can secure funds to aid in your needs as a self-employed individual. Our bridging loan choices are authorised and regulated by the Financial Conduct Authority to ensure borrowing integrity.

    We regularly help clients when it comes to bridging finance loan options, and strive to find ways to help those facing the prospect of securing financial services with affordable fees and the lowest monthly interest payments possible.

    For more information on the right bridging loan for those who are self-employed, rates and monthly repayments in several options, including fixed repayment date, and how an open, new secured loan can help you grown and prosper in your role, contact us for an informal chat and a free, no obligation quote.

    Experts in bridging loans, our friendly financial specialists are available for you to call or contact online today for expert advice.