Why unsecured bridging loans don’t exist and what to do instead

Are you looking for an unsecured bridging loan? If so, you might have noticed some confusing language surrounding this term. For example, it’s possible you may have clicked a link promising this product, only to find out the lender was offering a secured bridging loan or some form of unsecured short-term funding instead. Here’s why.

What is a bridging loan?

A bridging loan is designed to cover large gaps in funding. They’re usually used to help smooth out the purchase of a property. In fact, 19% of all bridging loans in Q1 2024 were taken out to prevent a property chain break. 

Example: Let’s say you want to take out a commercial mortgage, but the mortgage will take several months to organise and you’ve already found the property you love. In this instance, a bridging loan could help by providing the funding now while you continue to wait for the traditional mortgage. Once the mortgage comes through, you simply repay the bridging loan along with any interest.

👉 Are you looking for a bridging loan? Apply here.

What is an unsecured loan?

Unsecured finance means funding that is not backed by any collateral. Instead of putting up an asset as security, lenders will look at factors such as your credit score, company health, and financial history to decide on your eligibility.

👉 Want to apply for an unsecured loan? Click here.

Can you get a bridging loan without collateral?

No, you can’t. A bridging loan, by its nature, is secured by the asset it is being used to pay for or support. While they don’t always need to be used to purchase large assets, for example, they can be used to renovate a property instead, they are always secured.

Why do bridging loans require security?

Bridging loans are generally designed to provide large sums of funding for a short period. This means they carry greater risk for the lender, because: 

1. The sum is larger

2. The borrower has a reduced amount of time to repay the loan

These two factors together can increase the possibility that the borrower won’t be able to secure the funds required.

It’s important to note that an asset isn’t the only thing required to get a bridging loan. Most bridging loans also require an exit strategy, which is a document outlining how you plan to repay the loan, for example, with the sale of a different property or the completion of a mortgage.

Alternative options for short-term unsecured funding

• Credit card: Business credit cards provide fast monthly funding to help businesses manage their cash flow and make immediate purchases. They are usually repaid at the end of each monthly cycle and can be reused.  

• Overdraft: A business overdraft lets you quickly access working capital to cover short-term funding needs.

• Revolving credit facility: A revolving credit facility extends funds to you on a monthly basis, which you can draw from and replace each month as needed. Credit cards are a form of revolving credit, but you can also find revolving credit facilities that deliver the funds as cash, cheque, or bank transfer, which can help when paying employees.

Apply for unsecured short-term finance with Funding Options by Tide

We might not be able to find you an unsecured bridging loan, but we may be able to find you a secured bridging loan or unsecured finance solution. We’re a broker, which means we help match eligible borrowers to our network of over 120 lenders. Just click the link below and submit your information to find out if you’re eligible.

Apply for finance without collateral

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.