Understanding VAT Bridging Loans

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VAT bridging loans are exceptionally useful if, like many prospective commercial property buyers, you find yourself staring at a large, extra sum of money at the very end of the buying process.

If you’ve recently been caught out when purchasing a commercial property, and have been informed at the last minute of a significant, additional VAT payment, then a VAT bridging loan might be your best option. It’s important to know exactly what options are open to you in such a situation, as the purchase doesn’t necessarily have to fall through. One such option is to take out a VAT bridging loan, and that’s what we’ll be discussing here. We’ll explain what this kind of loan is, why it’s useful, and how it generally works.

 

What is a VAT bridging loan?

Effectively, VAT bridging loans are simply loans that bridge the gap between yourself and finalising a commercial property purchase. Unlike residential properties, commercial properties come with an additional VAT charge. It’s extremely easy to fail to notice that aspect of payment when you’re taking out a mortgage on a commercial property. All too often purchases of this nature fall through because an individual or company hasn’t legislated for the additional, significant fee. A bridging loan can give you a much-needed financial boost as the payment deadline looms.

If you’re in a situation where you’ve saved up for a commercial property without knowing about the additional VAT payment you’re going to be required to make, then you’ll understand how important a last-minute lift can be. A VAT bridging loan can ensure you don’t miss out on your purchase, and that you’re able to pay, in full, when the deadline hits.

 

When are bridging loans helpful?

VAT bridging loans are helpful, primarily, in last-minute situations. The likelihood is that you’ll have budgeted perfectly for your commercial property … unless you didn’t count the VAT. That extra 20% can often equate to a large amount of money – money that you can’t simply conjure out of thin air. Commercial properties aren’t cheap, so it makes sense that their VAT isn’t either. If you need to provide your VAT quickly, and don’t have time to get hold of it in another way before your purchase deadline, then a VAT bridging loan is a potential saviour.

 

How do VAT bridging loans work?

The exact way these loans work will vary company to company. As a rough guide, though, the loan company will provide you with the funds necessary to complete the VAT payment, and you’ll then be able to pay that back at a later date, agreed with your VAT bridging loan provider. Interest rates and turnaround times will vary, depending on who you get in touch with, but that’s a very basic overview of how the system works.

 

Where BloomSmith comes in

Hopefully, we’ve managed to cast some light over the mystery of bridging loans. The concept isn’t too difficult to understand once it’s been explained. To enquire about our loans, you need only give us a call on 020 3488 3411, or email us on vat@bloomsmith.co.uk. We understand that it’s easy to panic when you’re faced with an unexpected fee, but we’ll take care of everything for you.

AUTHOR

Peter Bloom

All stories by: Peter Bloom
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