Bridging loans are ideal for covering the Value Added Tax element of a commercial property purchase.
As VAT is payable and not covered under a commercial mortgage, a bridging loan enables you to complete the purchase while you reclaim the funds from HMRC.
VAT is notoriously complex and the true amount payable isn’t always clear until the last minute. In cases where there is insufficient finance to cover the cost, a quick bridging loan can help.
What is a VAT Bridge Loan?
A VAT bridging loan works in the same way as a standard bridging loan. It provides short term finance for a specific condition while you raise traditional capital in other ways.
As VAT isn’t always due on commercial property, it can be difficult to factor it into a traditional loan. If you don’t have the finance on hand to cover an extra 20% on top of the purchase cost, a bridging loan can help.
The loan will be secured on the recovery of that VAT from HMRC. Some lenders will require the asset to be held in a Special Purpose Vehicle until the loan is settled.
The use of this type of finance can have many advantages; it helps companies complete their purchase without having to wait for their finances, while also avoiding any potential penalties from HMRC.
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What are the benefits?
VAT Bridging Loans provide an effective way to cover the additional cost of VAT and other taxes, allowing businesses to take advantage of opportunities that may otherwise not be possible.
Specialist VAT bridging loans are available from a range of lenders and can be used for any number of business purposes including working capital, purchasing stock, bridging finance until invoices are paid or simply providing a cash flow boost.
By taking out a loan, business owners can access the funds they need quickly and without too much paperwork.
With flexible repayment terms and competitive interest rates, VAT bridging loans offer a convenient way to obtain the finance needed to cover any unexpected additional costs.
How much will it cost?
Loans are generally accessible commencing with an amount of approximately £50,000 (the same as the VAT on a purchase of £250,000) and can go up to over £20 million.
The costs associated with the loan may include interest, origination fees, and any other fees that the lender may charge.
Generally speaking, these loans will have higher interest rates than traditional loans as they are short-term solutions designed to help businesses make their payments quickly.
Additionally, lenders may require collateral or security in order to approve the loan.
It is important to research all terms and conditions before taking out a VAT bridge loan in order to understand all potential costs and ensure that it is right for your business needs.
Are VAT Bridging Loans the same as VAT Loans?
VAT bridging loans and VAT loans are two different types of loan products.
A VAT bridge loan is a short-term financing option used to cover the VAT costs associated with the purchase of a commercial property. It can be used to cover the cost of VAT until the main loan is approved.
On the other hand, a VAT loan is a longer-term financing product that can be used to cover the cost of a large purchase or investment over an extended period of time, such as when buying machinery or equipment for your business.
If you need to make a large purchase or investment and don’t have enough cash flow to cover the full amount upfront, then it may be worth considering using either a VAT bridge loan or a VAT loan.
Both options will enable you to finance your purchase and spread the payments over time while also allowing you to use your existing cash flow for other business needs.
Why choose GPS Financial
GPS Financial was founded in 2011 with the aim of ending the stress that goes with all the paperwork and misinformation of mortgaging your property.
We will handle all the details to secure the best solution for your finances, allowing you to relax knowing that everything is taken care of.
GPS Finanacial are an award winning finance company, taking home the award for Best Firm: Bridging & Commercial in 2022, selected by Dynamo for Intermediaries, one of the countries foremost Mortgage Clubs.
GPS Financial have a team of experienced brokers who have decades of combined knowledge in finance. We can offer you access to all the major lenders and make sure that you get the best value and service.
If you’re considering a VAT bridging loan or need to finance a project, contact the experts at GPS Financial, fill in the contact form at the top of the page and one of our financial advisors will be in touch.