Refurbishment bridging loans for commercial buildings

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What counts as light or heavy refurbishment on a commercial property?

Lenders sort refurbishment into two broad buckets because the risk is different. Light refurbishment is cosmetic and non-structural: decoration, new floor coverings, replacement kitchens and WCs, rewiring, new heating, upgraded lighting and suspended ceilings. Heavy refurbishment involves structural alteration, extensions, reconfiguring floor plates, new roofs, or works that need full planning permission or building regulations sign-off beyond minor notifications.

Feature	Light refurbishment	Heavy refurbishment
Typical works	Cosmetic upgrades, M&E renewal, fit-out	Structural alteration, extensions, reconfiguration
Planning	Usually none needed	Often required, sometimes with change of use
Building regulations	Limited	Full approval and completion certificate
Works funding	Single tranche or a few stages	Staged drawdowns against monitored progress
Monitoring surveyor	Sometimes	Almost always
Lender pool	Wide	Narrower, may overlap with development finance

The line between the two is not fixed and each lender draws it slightly differently. Our light vs heavy refurbishment guide covers the definitions in detail. If the works amount to a ground-up rebuild, development finance is usually the better fit.

How does a refurbishment bridging loan work from offer to exit?

The structure has two parts. The day-one advance funds the purchase (or refinances an existing loan) and is sized against the current open market value. The works facility pays for the refurbishment and is released in stages as the work is done.

1. Terms in principle: we present the property, purchase price, schedule of works, costings, contractor details and exit to suitable lenders.
2. Valuation: a RICS valuer reports both the current value and the value on completion (GDV) of the refurbished building.
3. Monitoring surveyor review: on heavier schemes, the lender's surveyor checks the costs, programme, contractor and consents before offer.
4. Legal work and completion: solicitors deal with title, the first charge, any debenture and guarantees, then the day-one funds are released.
5. Staged drawdowns: works money is paid in arrears after each inspection confirms progress.
6. Exit: the loan is repaid from a sale or refinance on the improved value.

See how it works for the general process we follow on every application.

How much can you borrow against current value and GDV?

Refurbishment bridging finance is usually tested against two limits at once:

• Day-one LTV: the initial advance as a share of current value, commonly up to 70% to 75% on a first charge for standard commercial property.
• LTGDV: the total facility (day-one advance, works money, and rolled or retained interest) as a share of the gross development value after works. This cap is what makes GDV lending useful, because it lets the facility grow beyond what the current value alone would support.

For example (illustrative): a vacant office bought for £1,000,000 with a £400,000 works budget and a valuer's GDV of £1,800,000. A lender advancing 70% of purchase (£700,000), the full works budget (£400,000) and around £150,000 of rolled interest and fees would have a total facility of £1,250,000, roughly 69% of GDV. You would fund the £300,000 balance of the purchase plus costs from your own resources.

Try the figures in our bridging loan calculator. Lenders cap LTGDV lower on specialist assets and secondary locations, and they will want to see that the GDV is evidenced by comparables, not assumed.

How are works funds released, and what does the monitoring surveyor do?

Most lenders release works money in arrears: you or your contractor fund each stage, then the lender reimburses it once the monitoring surveyor has inspected and signed off the work. This means you need working capital to cover at least the first stage. Some lenders will release a small first tranche at completion for light works.

The monitoring surveyor acts for the lender, not you. Their role typically includes:

• Reviewing the schedule of works, cost plan and programme before offer.
• Checking the contractor's experience, insurance and building contract.
• Confirming planning permission and building regulations are in place where needed.
• Inspecting progress before each drawdown and certifying the value of work done.
• Flagging cost overruns or delays early so they can be addressed.

Their fees and the cost of each visit are normally paid by the borrower. Agreeing a sensible number of drawdown stages at the outset avoids paying for more visits than the project needs.

What do lenders check before they fund a refurbishment?

Lenders look at three things: the building, the plan and the people.

• The building: location, condition, use class, title and whether the finished product will be lettable or saleable.
• The plan: a costed schedule of works with a contingency (commonly around 10%), a realistic programme, consents, and evidence that the value after works is supported by comparable evidence.
• The people: your experience with similar projects, your contractor's track record, your credit history and the equity you are contributing. A personal guarantee is usually required from directors of a limited company or SPV borrower.

First-time refurbishers can still borrow, particularly on light works, but expect lower leverage and a closer look at the professional team. Bringing a detailed schedule of works to the first conversation is the single biggest thing that speeds up terms.

What does refurbishment bridging finance cost?

Pricing is set per month and depends on leverage, asset type, works intensity and your experience. Lower LTV and lighter works price better. The main costs are:

Cost	How it is charged
Monthly interest	On the day-one advance from completion; on each works tranche from its drawdown date
Arrangement fee	Typically around 1% to 2% of the loan, usually added to the facility
Exit fee	Some lenders charge one, others do not; it affects total cost
Valuation	RICS report covering current value and GDV
Monitoring surveyor	Initial report plus a fee per inspection
Legal fees	Your solicitor and the lender's solicitor

Interest is usually retained for the day-one advance and rolled up on works tranches, so you pay interest only on money actually drawn. Model the total in the bridging cost calculator and compare current pricing bands on our rates page.

Which exit strategies work for a refurbished commercial building?

The exit is what the lender is really underwriting. Common exits include:

• Refinance onto a commercial mortgage once the building is let on acceptable lease terms. If you plan to let first, see commercial bridge to let.
• Sale of the whole building to an investor or owner-occupier on the improved value.
• Sale or refinance of individual units where the refurbishment creates several lettable or saleable parts.

Where the works include converting to flats, the planning route and exit are different; our commercial to residential conversion finance page covers that. Always build in time for letting voids or a slower sale, because the term must cover the works and the exit, not just the works.

Is a refurbishment bridge the right product, or is there a cheaper alternative?

A refurbishment bridge fits when the building is unmortgageable today, the works are defined and the value uplift is clear. It is not always the lowest-cost route. Alternatives worth considering:

• Commercial mortgage plus cash-funded works if the building is already lettable and income-producing.
• Development finance for heavy, structural or ground-up schemes.
• Second charge borrowing against another property to fund the works.
• Joint venture equity if leverage limits leave a gap.

Bridging is unregulated when the property is held for business or investment purposes. If anyone in your family will live in part of the building, the loan may be regulated and would go to a firm directly authorised by the Financial Conduct Authority, which we introduce. We are not directly authorised by the Financial Conduct Authority ourselves.

Unregulated commercial and investment bridging is arranged directly. Any case where the security includes a home you or an immediate family member occupies, including a flat above commercial premises, may be regulated and is introduced to a firm directly authorised by the Financial Conduct Authority. We are not directly authorised by the Financial Conduct Authority ourselves. Your property may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.