Refurbishment funding for UK businesses

The first fork in the road is whether the work is cosmetic or structural. A new floor, a repaint, a bar rebuild and a kitchen line are fit-out, and they can fund like equipment, as an asset. Knock a wall out, change the use class or add a floor and you are in property lending, where bridging lenders that fund heavy refurbishment operate.

That distinction decides the price. Fit-out on an unsecured facility carries an annual rate and is repaid monthly over a fixed term. Bridging is priced monthly instead, with an arrangement fee on top, and is meant to be cleared within months by a sale or a refinance.

A useful sub-criterion if the building is a wreck: some bridging lenders will lend against value rather than purchase price, which matters when you have bought something under the market, and some accept an automated valuation, which can take a fortnight out of the timetable.

Bridging tariffs are where refurbishment budgets quietly go wrong, and the published detail varies enormously. Each lender sets its own minimum rate by loan size and loan-to-value band, and its own day-one charges, so on a smaller bridge the fees can take a noticeable share of the facility before a single month of interest is paid. Reading a lender's tariff before the budget is set shows that cost in advance.

Minimum loan sizes rule people out before rates do. Each bridging lender publishes its own floor, and some also cap shorter terms at a lower loan to value or insist on a minimum term, so a small or very short refurbishment bridge narrows the list before pricing comes into it.

Then there is what happens if the job overruns, which on refurbishment it often does. A bridge that runs past its term moves onto the lender's published extension terms, and each lender sets its own extension and post-completion charges in its tariff. Those are the lines to read first on a refurbishment, because the job is the thing most likely to run long.

Some borrowers take a term longer than the planned works. A twelve-month facility on a six-month job costs more in interest and may avoid an extension fee; the term is the borrower's decision, and the lender makes its own.