Can you get a bridging loan if you are a contractor?

Introduction

Bridging loans are becoming more popular, acting as a short-term solution for individuals who need quick access to funds. Contractors may need these financial tools for reasons like covering project costs, managing cash flow gaps, or for investment opportunities.

What are bridging loans?

A bridging loan is a short-term financing option designed to bridge the gap between the purchase of a new property and the sale of an existing one. However, these loans are not limited to just buying property. They can be used for a variety of purposes, making them suitable for contractors facing immediate financial needs.

What are the challenges for a contractor looking for a bridging loan?

While bridging loans are accessible to many, contractors may encounter some challenges in the application process. Some lenders often prefer stable income streams and consistent employment history, which can be a problem for contractors with a varied income. The variable nature of a contractor's income may raise concerns for lenders about the borrower's ability to repay the loan.

What is there to consider when taking out a bridging loan as a contractor?  

Financial stability

Contractors must demonstrate financial stability by showcasing a history of successful projects and reliable income. Some lenders may request proof of contracts, invoices, and other financial documentation to assess the contractor's earning potential.

Credit history

A contractor's credit history is a crucial factor in securing a bridging loan. A good credit score can strengthen the application and increase the chances of approval. However, specialist lenders can be more lenient on this outlook. At Mercantile Trust, we do not use credit scoring to measure how eligible you are for a bridging loan. Instead, we apply a holistic view when assessing our applications. Therefore, even if you do have a poor credit score, we could still get you the loan you need.

Loan purpose

Clearly outlining the purpose of the loan is essential. Whether it's covering project costs, addressing cash flow gaps, or investing in a business opportunity, providing a detailed plan gives the lender confidence.

Exit strategy

Bridging loans are short-term solutions, and lenders want the reassurance that borrowers have a viable exit strategy for repaying the loan. Contractors should present a clear plan, whether it involves the completion of a project, securing a traditional mortgage, or other means of repayment.

Lender selection

Contractors should explore lenders who specialise in working with self-employed individuals or those in the construction industry. Such lenders may have a better understanding of the unique financial circumstances contractors face.

Whether you are self-employed, employed full time, work several jobs, or even if you have retired, we could still get you the bridging loan you need.

Summary

Contractors can get bridging loans, but it requires careful planning, documentation, and a thorough understanding of the challenges they may face. By presenting a solid financial profile, a clear purpose for the loan, and an exit strategy, contractors can increase their chances of securing the short-term financing they need. As the need for bridging loans changes, more lenders are recognising the diverse needs of self-employed individuals, making bridging loans an increasingly practical option for contractors seeking quick and flexible financing solutions.