Unregulated bridging loan explained:investment and business purpose lending
An unregulated bridging loan is short-term finance secured on property that neither the borrower nor their immediate family lives in or will live in, taken for an investment or business purpose, and so it sits outside the Financial Conduct Authority's rules for regulated mortgage contracts. Most bridging secured on commercial property falls into this category, and we arrange it directly.
The line between regulated and unregulated is not about the size of the loan or the type of borrower. It turns on who occupies the security. Getting it right at the start protects you and keeps the deal on track, so this page explains exactly where it sits and what changes on each side.
Key takeaways
An unregulated bridging loan is for investment or business purposes on property nobody connected to the borrower lives in.
If you or an immediate family member will live in the security, the loan may be regulated, and we introduce it to an authorised firm.
Unregulated bridges are governed by the loan agreement, so independent legal advice on the terms matters.
Most unregulated bridges to companies need personal guarantees; true non-recourse lending is uncommon on smaller loans.
We arrange unregulated bridging directly and introduce regulated cases to an FCA directly authorised firm.
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What is an unregulated bridging loan?
Bridging loans fall into two groups. A regulated bridge is a regulated mortgage contract: broadly, a loan to an individual or trustees secured on land where the borrower or a close family member lives, or will live, in at least 40% of the property. Those loans are covered by the FCA's mortgage conduct rules.
An unregulated bridging loan is everything outside that definition where the purpose is investment or business. Typical examples include:
a limited company buying a warehouse at auction;
an investor buying a shop with a flat let to an unconnected tenant;
a developer buying land with a view to obtaining planning;
a trading business raising cash against its freehold premises for working capital.
Unregulated does not mean unsupervised. Many bridging lenders are authorised by the FCA for their regulated lending, anti-money laundering rules apply to every case, and some lenders belong to trade bodies such as the Association of Short Term Lenders. For a broader comparison, see our guide to regulated vs unregulated bridging.
Where is the line between regulated and unregulated bridging?
The test is about occupation. A bridge to an individual or trustees is regulated where at least 40% of the security is, or will be, used as a home by the borrower or an immediate family member (a spouse or civil partner, parent, child, sibling, grandparent or grandchild).
That share can be finely balanced, so if you or your family will live in the security at all, we treat the case as potentially regulated and introduce it to an FCA-authorised firm. If not, and the purpose is investment or business, it is normally unregulated.
Scenario
Usual position
SPV buys an office block to convert and sell
Unregulated
Investor buys a parade of shops with flats let to unconnected tenants
Unregulated
Business owner raises funds on an investment property for the business
Unregulated
Shopkeeper buys premises and lives in the flat above
Regulated if the flat is 40% or more of the property
Investor buys a building where their daughter will live in one flat
May be regulated, depending on who borrows and the flat's share; we introduce it to an authorised firm
Homeowner borrows against their house to fund a commercial purchase
Regulated, because the security is their home
Two points catch people out. First, future occupation counts: if you intend to move in during the term, say so now. Second, borrowing through a limited company does not settle the question on its own, because lenders apply their own policies where a director or their family will live in the property. Buildings with flats are covered in more detail on our semi commercial bridging loan page.
What counts as an investment or business purpose?
Lenders will ask you to confirm the purpose of the loan, and often to sign a declaration. Purposes that sit comfortably in the unregulated world include:
Buying commercial or investment property to let, refurbish, convert or sell.
Funding a business: buying premises, paying a tax bill, working capital or an acquisition. See business bridging loans.
Refinancing an existing commercial or investment loan.
Development and planning gain on land or buildings.
The declaration matters. Signing a business purpose declaration when the property will in fact be a family home is a serious problem for everyone involved. If your plans are mixed, tell us and we will route the case correctly.
Have a deal in front of you?Send us the property and the numbers. We will tell you quickly whether it is fundable.
Who regulates bridging loans?
The Financial Conduct Authority regulates bridging loans that are regulated mortgage contracts, and the firms that lend on them, arrange them and advise on them. Those firms must follow the FCA's mortgage conduct rules.
An unregulated bridging loan is not covered by those mortgage rules. It is governed by the loan agreement, general law and the lender's own policies, alongside anti-money laundering obligations. Lenders that are FCA authorised for other activities remain subject to the FCA's general standards in how they run their business.
Our own position: we arrange unregulated bridging directly. We are not directly authorised by the Financial Conduct Authority, so where a case is regulated we introduce it to a firm that is, and we tell you that at the outset.
What protections differ on an unregulated bridge?
Borrowers should go into an unregulated bridging loan understanding what they do and do not get:
Area
Regulated bridge
Unregulated bridge
Who can arrange it
FCA authorised firms with mortgage permissions
Specialist commercial brokers, including us
Affordability
Assessed under FCA rules
Assessed on the lender's own risk view, focused on the security and exit
Disclosure
Prescribed formats and standards
Set by the lender's terms and the facility letter
Arrears and default
FCA rules on treating customers fairly in arrears
Governed by the loan agreement, including default interest and receivership
Complaints
Financial Ombudsman Service for eligible complainants
Depends on the lender and whether you are an eligible complainant; ask the lender
That is why independent legal advice on the facility letter matters on an unregulated case. Your solicitor should explain default interest, extension fees and the lender's remedies before you sign.
What makes you eligible for an unregulated bridging loan?
Unregulated bridging lenders focus on three things more than anything else:
The security: its value, condition, location and how easily it could be sold.
Your contribution: deposit, equity or additional security, and the source of funds.
The exit: a realistic sale or refinance within the term.
They will also look at your experience, credit history, the structure of the borrowing entity and anti-money laundering checks on everyone involved. Adverse credit is not an automatic bar if it is disclosed and explained. Our guide to bridging loans for limited companies covers SPVs and company structures.
Are unregulated bridging loans non-recourse?
Rarely, at the smaller end of the market. A non-recourse loan lets the lender recover only from the property, not from the borrower's other assets. Most unregulated bridging to SPVs and trading companies is supported by personal guarantees from the directors or shareholders, which means the lender can pursue them personally if a sale of the property leaves a shortfall.
Limited or non-recourse terms are more realistic on large loans to well-capitalised borrowers with strong assets and low gearing. Take independent legal advice before giving any guarantee. Our guide to personal guarantees on bridging loans explains limited and unlimited guarantees.
What happens if an unregulated bridging loan is not repaid?
A loan that has passed its term without repayment, or where the borrower has stopped meeting its terms, is often described as a non-performing loan. On an unregulated bridge, the consequences are set by the loan agreement: default interest, extension fees and, ultimately, the lender appointing an LPA receiver to sell the property.
Most lenders would rather agree an extension or see a refinance than enforce, but only if you engage early. Our guide to bridging loan extensions and defaults sets out your options if an exit slips.
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.
The Financial Conduct Authority regulates bridging loans that are regulated mortgage contracts, which broadly means loans secured on a home the borrower or a close family member lives in or will live in. Unregulated bridging for investment or business purposes is outside the FCA's mortgage rules and is governed by the loan agreement, general law and anti-money laundering rules.
What is a non-performing loan?
It is a loan where the borrower has stopped making required payments or has otherwise defaulted, for example a bridge that has passed its term without being repaid. On an unregulated bridge, the lender's remedies are set by the loan agreement, including default interest and, ultimately, appointing a receiver to sell the property. Engaging early usually keeps more options open.
How hard is it to get a non-recourse loan?
Hard at the smaller end of the market. Most bridging lenders want personal guarantees from directors or shareholders of a borrowing company. Limited or non-recourse terms are more realistic on larger loans to well-capitalised borrowers with low gearing and strong assets. Always take independent legal advice before signing any guarantee.
What makes you eligible for a bridging loan?
Lenders look first at the property offered as security, your deposit or equity, and a credible exit to repay within the term. They also consider your experience, credit history, the borrowing entity and anti-money laundering checks. On an unregulated bridge, the property and exit carry most weight, so a strong plan can offset a thinner track record.
Is a bridging loan to a limited company always unregulated?
Not automatically. If a director or their immediate family will live in any part of the property, lenders apply their own policies and many will treat the case as regulated or decline it as unregulated. Tell us who will occupy the property at the outset, so the case is routed to the right type of firm and lender.
Is an unregulated bridging loan riskier for the borrower?
It carries fewer of the protections attached to regulated mortgages, so the loan agreement matters more. Read the facility letter carefully, understand default interest and extension terms, take independent legal advice, and make sure your exit is realistic. Used with a solid plan, an unregulated bridge is a standard tool for commercial property.
