Bridging loan transactions reached £716.2 million in 2022 in the UK, and continue to increase, with £220.8 million gross lending in Q3 2024 alone. 24% of this was for investment purchases, up from 18% in the previous quarter.
Bridging finance is becoming increasingly popular for several reasons. This type of lending offers quick access to funds, ideal for time-sensitive transactions such as property auctions. Bridging loans are highly versatile and help fill a growing demand for short-term financing solutions, especially in the property market, where buyers and investors need immediate capital.
The most common uses for bridging finance are; buying a new property before selling the existing one, financing renovations or refurbishments, buying properties at auction, short-term investment opportunities that require immediate funding, and property development (both commercial and personal). Bridging loans are designed for short-term use, typically lasting from a few weeks to a year. Borrowers can repay the loan once they’ve secured long-term financing or sold the property, providing a flexible way to manage their finances. There are two types of bridging loans, open loans which have no fixed repayment date, and closed loans for those with a definite exit strategy.
Due to their short-term nature and quick turnaround, bridging loans usually have higher interest rates compared to traditional lending options such as mortgages. But what if you can’t take a traditional interest-based loan for religious reasons?
Many Muslims find themselves in this situation, as the lending of money to make interest is considered haram (a sin), and is therefore not allowed under Islamic law. Some non-Muslims also look for Sharia-compliant lending (also known as Halal lending) for ethical reasons, as it’s underpinned by important ideals, such as not causing harm. It can be difficult enough to secure bridging finance at the best of times, because of its strict criteria, complex application process and focus on good credit history, without this additional layer of complexity. Furthermore, few financial institutions offer Sharia-compliant products, which can limit options further. So, where can those needing Sharia-compliant bridging finance look for support?
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Well, that’s where a private finance broker comes in.
Enness Global have access to a network of private banks and lenders who offer much more flexible criteria and can tailor financing deals to cater for a range of circumstances and situations. We can help arrange Islamic lending based on profit sharing and asset backed principles, such as Murabaha finance. The Murabaha method involves the financier buying a commodity at today’s price (such as metal, foodstuffs, or oil), then transferring it to the customer at an agreed mark-up, for them to immediately sell it in exchange for cash. This is also known as a ‘cost-plus’ arrangement, and an agent is appointed for the customer to facilitate the process.
Please be aware, Islamic finance does recognise the value of time within Sharia-compliant contracts, and therefore the financier still makes money, but importantly this specialist type of arrangement means there is no interest involved.
Islamic lending generally has more strict paperwork requirements and verification processes may be required to ensure that all transactions adhere to Islamic principles. Islamic finance contracts must be made in writing and witnessed to ensure transparency and mutual understanding. Our team of experienced advisers are familiar with the process of obtaining Sharia-compliant financing and can help manage the application process, sourcing the best terms on your behalf.
As a broker with experience of dealing with high-net-worth clients from a variety of backgrounds across the globe, often with multiple or unusual income streams, we’re well placed to deal with a wide range of non-typical lending scenarios including high value Sharia-compliant bridging finance.
