VAT Bridging Loans

What is a VAT bridging loan?

A VAT bridging loan is a short-term, flexible loan used to fund the VAT due on a commercial property purchase.

When is VAT payable on commercial property?

VAT is payable on commercial property when the seller has elected to charge VAT or when a freehold commercial property is less than 3 years old. Sellers of a commercial property may opt to tax to enable them to recoup expenses related to the property – such as refurbishment costs and professional fees incurred prior to selling the property.

The decision apply VAT adds 20% (at the current rate) on top of the purchase price of the building. This is a significant additional cost for the buyer, particularly if it is unexpected and not budgeted for. A purchaser can claim back VAT on commercial property if they are registered for VAT or have opted to tax the property.

The benefits of a VAT Bridging Loan?

A VAT Bridging loan is ideal if you require short-term funds to settle a VAT liability on a commercial property purchase. Often, the need for a VAT bridging finance is a last-minute requirement. VAT bridging lenders specialize in providing funds quickly to get a deal done and within the deadline.

Some Bridging Lenders provide VAT bridging loans on a secured basis taking a first or second legal charge over the acquiring property and/or another property to secure the loan. Other, more specialized VAT bridging lenders can liaise directly with HMRC and manage the recovery of VAT on an unsecured basis without using equity from property – a benefit that can free up time and resources to focus on your business.

VAT bridging loans are highly flexible, and repayment can be made without early repayment charges. Furthermore, VAT refunds can take up to six months and the option to repay a VAT bridging facility early without penalties can reduce interest payments and lower the overall borrowing costs.

Rules to reclaim VAT on commercial property purchase?

VAT can be reclaimed if HMRC approves the transaction and if both the seller and buyer of the commercial property have opted in and registered to charge VAT.

How much of the VAT charge can be borrowed?

You can borrow up to 100% of the VAT amount due before reclaiming it back from HMRC. VAT bridging lenders can lend between £50,000 to £25,0000,000.

VAT Bridging Loan interest rate and arrangement fees?

The interest rate for VAT bridging loan will typically range from 0.49-1.5% per month, with arrangement fees of between 1.5-2% of the loan amount.

How long does it take to get a VAT Bridging Loan?

Funding for VAT bridging loans takes 1-3 weeks from application to receiving the funds to make the VAT payment to HMRC. The speed does depend on the circumstances, complexity, and the efficiency of all parties involved.

How can a VAT bridging finance broker help?

A VAT bridging finance broker will help you arrange the finance required to fund a VAT liability. Quest Commercial Finance is a London based bridging finance broker. We save you time by approaching multiple lenders, help you understand the terms and conditions associated with the VAT finance and negotiate the best possible terms.

Contact us to discuss your borrowing requirements

Call us on 020 8988 1102 

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