Student accommodation bridging finance

Lending criteria and exit requirements

Bridging lenders are more flexible than term lenders on the property and its current state, because the loan is short term and security-led, but they are strict on the exit. They will lend on a site without planning, on an asset mid-works, or on a property bought before it is income-producing, where a term lender would decline. What they need is a clear first charge over a saleable, financeable asset and a credible repayment route within the term. For a developer, that route is usually a refinance onto development finance once the build is ready, or onto an investment loan once the scheme is let; for an investor, it can be a sale. They will check the borrower's experience and the logic of the deal, but they are not underwriting years of trading. The exit must be real and arranged before the bridge draws, so you are never left holding short-term money with no way out. We confirm the exit at the outset and document it alongside the bridge.

Loan to value, rates and term

Bridging lenders advance indicatively up to 70 percent of value, with the figure set by the valuation basis and the quality of the exit. Where the asset needs work, the loan may be sized against current value with a further tranche for the works, or against the value once the works are complete. Bridging is priced per month, indicatively around 0.75 to 1.25 percent, because it is short term, fast and flexible, so it is dearer than a term facility and should be used only for as long as needed. The term runs in months not years, typically one to eighteen, and interest can be retained or rolled up so it does not strain cashflow. Because interest can be retained, the net amount you receive at completion is the gross loan less retained interest and fees, so it pays to size the facility against what you actually need. We model the loan to value, the retained interest and the day-one net advance up front. All bands are illustrative, subject to principal sign-off and not an offer.

Bridging-to-development and bridging-to-term routes

The single biggest cost lever on a bridge is time: a bridge held for three months costs a fraction of one held for eighteen, so lining up the exit early matters. Expect a lender arrangement fee of around 1 to 2 percent, a valuation fee, legal costs for both sides, and sometimes an exit fee. The two classic PBSA routes are bridging-to-development, where the bridge secures the site and is repaid by drawing development finance once the build is ready to start, and bridging-to-term, where the bridge funds a quick acquisition of an income-producing asset and is repaid by an investment term loan once the lender's process completes. In both cases the bridge buys speed and the term facility delivers the cheap, long-term money. We disclose our broker fee in writing, quote the all-in cost over the expected term, and never claim an exclusive tie to any lender.

Bridging, development finance or an investment loan

Bridging is the right product when you need to move faster than a term lender can, or when the asset cannot yet be financed on a development or investment facility. It is short-term money and is always meant to be repaid by something cheaper: development finance once the build is ready, an investment loan once the scheme is income-producing, or a sale. If you are building and the development facility can be arranged in time, development finance is cheaper and the right first port of call. If the asset is already let and trading, an investment term loan is the cheapest money. The classic PBSA sequence is to bridge to secure the site or asset quickly, then refinance onto development or investment debt. We plan that exit at the outset so the bridge does its job and then steps aside.