Non-status bridging loans have become a handy option for those needing quick and easy access to funds.
These loans focus more on the value of the asset rather than the borrower’s financial history.
This guide will walk you through the ins and outs of non-status bridging loans, helping you understand if they might be the right choice for your next project.
What are Non-Status Bridging Loans
Non status bridging loans are short term secured loans that focus on the value of the asset being used as security not the borrowers credit status.
These loans can be 1-36 months in duration and are a quick fix for time sensitive opportunities.
The ‘non-status’ part means the lenders focus less on your credit history, so they’re available to a wider range of borrowers, including those with imperfect credit or no provable income.
Non status bridging loans are similar to traditional bridging finance but have their own quirks.
The approval process is a bit quicker as lenders aren’t held back by credit checks and income verifications. But that speed and flexibility comes at a higher interest rate than full status loans.
Loan amounts for non status bridging finance start at £150,000. Loan to value (LTV) ratios are 65-75% but some lenders will go up to 80% for strong applications.
explore bridging loansThe Application Process
Securing a non-status short-term loan begins with an initial enquiry and assessment, where the lender evaluates the property or asset you’re offering as security.
This valuation is key, as it forms the basis of the loan offer.
Alongside the asset valuation, lenders want to understand your exit strategy – how you plan to repay the loan.
This could involve selling the property, refinancing to a mortgage, or using funds from another source. A clear, viable exit strategy is often more important to lenders than your credit history in these cases.
It’s fair to say that most non-status loans are repaid when the asset is sold, rather than refinancing.
The underwriting process focuses primarily on the asset’s value and your exit strategy. This approach often results in a quicker approval process, with many lenders able to make decisions and release funds within 5-10 days.
Once approved, the final steps involve legal work to secure the loan against the asset. After this is complete, the funds are released, allowing you to move forward with your project or purchase.
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Who can use Non-Status Bridging Loans?
Non status lending is useful for many individuals and businesses.
Property developers and investors use these loans when they need to move fast on opportunities. For example if you spot an undervalued property at auction a non status bridging loan could fund the purchase before traditional finance can be arranged.
These loans can be a lifeline for borrowers with bad credit.
If past financial difficulties have left your credit score not so great you may struggle to get finance. Non status bridging loans offer an alternative, they focus on the value of your property not your credit report.
They can also be useful if you’re waiting on some annual accounts or tax returns. If you don’t have enough proof of income then a non status lender should be able to help in the meantime.
But you need to have a solid exit strategy in place as the higher interest rates can be costly if extended too long.
Can you get a bridging loan with no income?
Yes, this is possible using a non-status lender.
We can secure funding where there is no provable PAYE or self-employed income. Bridging loans don’t require any monthly repayments, so affordability and income aren’t so relevant.
You will need to have sufficient assets/equity to demonstrate to the lender that you have wealth behind you.
Common Uses
Bridging loans are versatile.
Most common use is for property purchases.
For property, auction purchases need to be legal completion within 28 days. A non status bridging loan can provide the funds quickly so you can act fast on opportunities as they arise.
Property refurbishment and development projects can also use non status bridging finance.
These loans can fund anything from light refurbishment to full renovations so you can add value to a property before selling.
For example you might use a bridging loan to fund the conversion of a large house into several flats with the intention of selling the individual units to repay the loan.
Beyond property specific uses these loans can be used for business purposes. They can provide working capital, fund stock purchases or even facilitate a business acquisition. The key is to have a clear plan to repay the loan within the short term.
Pros and Cons
The non-status aspect opens up finance for those who may struggle to get finance due to past financial difficulties.
When opportunities arise that need to be acted upon quickly these loans can provide the funds far faster than other finance. The speed and flexibility of the funds makes non status bridging loans a powerful tool for property investors and developers.
One of the main pros is bad credit history, but these lenders can also help borrowers who are unemployed, between jobs or on sick leave.
The key to success in these situations is having a good asset, low LTV and an exit strategy.
These benefits come with risks that borrowers need to be aware of.
The interest rates on non status loans are higher than other bridging loans, because the lender takes on more risk. These higher rates and fees can make non status bridging loans a costly form of finance if not managed properly.
Exit Strategies
An exit strategy is your plan for how you are going to pay the lender back. Exit plans form an important part of applying for any bridge loan, and lenders always look at them very carefully.
The most common exit strategy is the sale of the property.
This approach works well for developers or investors who are refurbishing properties to sell at a profit. However, it’s essential to consider current market conditions and realistic timelines for completing work and securing a sale.
Another popular exit strategy is refinancing to a long-term mortgage. This approach is often used by investors who plan to keep the property for rental income. During the term of the bridging loan, borrowers may work on improving their credit score or increasing the property’s value to qualify for a traditional mortgage.
For development projects, the completion and sale of the developed units often serve as the exit strategy.
This might involve converting a commercial property into residential flats or building new homes on a plot of land. The key is to ensure that the projected profits from the development will comfortably cover the bridging loan repayment.
Choosing a Provider
Working with an experienced broker will get you the best outcome.
Brokers have access to a wide range of lenders, including specialist providers who don’t work directly with the public, in fact most non-status bridging finance providers only deal with intermediaries.
Our brokers can match your circumstances with the best lender for you and get you better terms than you would get yourself.
This is especially true for non-status lenders.
We work with a select few lenders who don’t do credit checks or income verification.
Non-status bridging loans offer an important lifeline to investors and developers who need quick access to funds, particularly when traditional financing options are unavailable or too slow.
By focusing on the value of the asset rather than the borrower’s financial status, these loans open up opportunities that might otherwise be out of reach.
Need some help?
If you need a short-term bridging loan then a specialist broker is a good place to start. You will get expert help and advice along with a wide range of lenders to choose from.
To speak with a specialist broker, please call us on 020 3556 9137
