Property investment through a limited company makes good business sense, but finding quick finance can be challenging.
When you spot the perfect property or win at auction, you need funds fast – and that’s where SPV bridging loans come in. These short-term loans designed for Special Purpose Vehicles (SPVs) help you move quickly on property opportunities while keeping the tax benefits of company ownership.
Let’s look at how they work, who they’re right for, and what you need to know before applying.
What is an SPV Bridging Loan?
Think of an SPV bridging loan as a short-term funding solution specifically for companies set up to hold property.
The ‘SPV’ part means Special Purpose Vehicle – a separate company created for a specific reason, in this case buying and holding property. The ‘bridging’ part refers to the loan’s short-term nature, usually running from 3 to 18 months.
These loans work differently from regular bridging finance. When you borrow through an SPV, the loan is made to your company rather than to you personally. This brings several advantages, especially around tax treatment and asset protection.
Let’s say you’re buying a property at auction through your SPV.
You’ve won the bid but need to complete within 28 days. A standard mortgage would take too long, but an SPV bridging loan could provide the funds you need quickly, giving you extra time to arrange longer-term finance.
The structure is straightforward: your SPV borrows the money secured against the property you’re buying. You’ll agree on an exit strategy – usually either selling the property or refinancing to a longer-term mortgage – and a timeline for repaying the loan.
Benefits of Using an SPV
Setting up a company for property investment might seem like extra work, but the SPV structure can offer real advantages.
The main benefit lies in tax treatment – your company pays corporation tax rather than income tax on profits, which often means a lower tax bill.
Plus, all of the interest you pay on the loan counts as a business expense.
Beyond tax, SPVs provide better asset protection.
By keeping property separate from your other business interests or personal assets, you reduce risk. Many lenders prefer lending to SPVs too, which can mean smoother applications and sometimes better terms.
Another plus? SPVs make it easier to grow your portfolio.
As your company builds a track record, you might find it easier to secure future funding. You can also bring in business partners or investors more easily through a company structure.
Who Should Consider an SPV Bridging Loan?
These loans suit several types of property investors.
If you’re building a buy-to-let portfolio, an SPV structure could make good sense. The same goes for property developers who want to keep each project separate and protected.
Business owners often use SPV’s when buying commercial premises. It helps separate property assets from trading activities – smart business practice that many accountants recommend.
Even if you’re new to property investment, starting with an SPV can set you up well for the future.
Just remember, you’ll need good advice from accountants and legal professionals to set everything up properly.
Common Uses for SPV Bridging Loans
SPV bridging loans solve various property funding challenges.
Auction purchases are a prime example – when you need to complete within 28 days, these loans provide quick access to funds. They’re also perfect for breaking property chains, letting you move forward with a purchase while waiting for another property to sell.
Light refurbishment projects work well with SPV bridging finance too. Say you’ve found a property needing updating before it can be mortgaged or let out. A bridging loan gives you time to complete the work and either refinance or sell for a profit.
For bigger projects, these loans can fund heavy renovation work. Many developers use them to buy and refurbish properties through their SPVs, then either sell on or refinance once the work’s done.
How SPV Bridging Loans Work
The mechanics of SPV bridging loans are quite straightforward.
Your company borrows money secured against a property, with loan amounts based on the property’s value. The maximum loan to value is usually 75%.
The loan term gives you time to either sell the property or arrange longer-term finance.
Most lenders offer various interest payment options. You might pay monthly, roll up the interest to pay at the end, or have it deducted from the loan at the start. Each option has its merits – it’s about what works best for your cash flow.
Exit strategy matters hugely here.
Lenders want to see a clear plan for repaying the loan, whether that’s through sale, refinance, or another source of funds. The stronger your exit strategy, the smoother your application will likely be.
Requirements and Eligibility
To qualify for an SPV bridging loan, you’ll need a properly structured limited company.
This means having the right company documents, a business bank account, and often a clear separation between your property activities and other business interests.
Experience levels matter – some lenders want to see previous property experience, while others are happy with first-time investors if they have a solid plan. The property itself needs to meet the lender’s criteria too, particularly around condition and intended use.
Documentation requirements include company accounts, proof of ID for directors, and details of your exit strategy. Having these ready when you apply can speed things up considerably.
Personal Guarantees – What You Need to Know
When you borrow through an SPV, lenders will ask directors to sign a Personal Guarantee (PG).
This means you’re personally responsible for repaying the loan if your company can’t. While your SPV offers some protection, a PG effectively puts your personal assets on the line.
Most lenders require PGs from all directors who own more than 20-25% of the company. These guarantees usually cover the full loan amount plus any interest and charges.
Before signing a PG, consider getting independent legal advice. You should understand exactly what you’re committing to and how it might affect you if things go wrong. It’s also worth discussing the implications with your accountant, especially regarding how a PG fits with your wider business planning.
Working with a Broker
A good broker brings real value to SPV bridging loans.
They understand which lenders suit different situations and can often access exclusive rates. More importantly, they know how to present your case to lenders in the best light.
Brokers handle the paperwork and chase things along, saving you time and stress. They’ll also spot potential issues early and help solve them before they become problems.
Alternatives to Consider
While SPV bridging loans work well, they’re not your only option.
Personal bridging loans might work better if you’re buying a single property and don’t need a company structure. Commercial mortgages could suit if you have more time and want longer-term finance from the start.
Development finance offers another route, particularly for larger renovation projects. Traditional business loans might work too, though they often take longer to arrange and might not offer the same flexibility.
SPV bridging loans offer a practical solution for property investors using company structures.
They provide quick access to funds while maintaining the tax benefits of investing through a limited company. Whether you’re buying at auction, breaking a chain, or funding renovations, they’re worth considering as part of your property investment strategy.
Ready to explore SPV bridging loans further? Get in touch with our team. We’ll help you understand your options and find the right solution for your property investment plans.