A bridging loan chain break lets a buyer complete on a property when the money from another sale is delayed. For a UK limited company buying commercial, mixed-use or investment property, EAL Holdings lists chain breaks as a typical use of its property-secured finance. Before borrowing, check seven things: who the lender serves, the security, the exit, the full cost, the credit search, the paperwork and your fallback plan.
Chains break for ordinary reasons. A buyer further down pulls out, a survey turns up a problem, or a sale simply runs late. If your company has agreed to buy a property and the seller will not wait, a short-term loan can cover the gap until your own sale or refinance completes. Lenders such as EAL Holdings set out who they lend to and what they need, which gives you a useful benchmark when you speak to anyone else.
This checklist is written for company directors and property businesses. Homeowners breaking a chain on their own home are in a different position, which the first check explains.
1. Check that the lender actually lends to your type of borrower
This is the first filter, and it rules lenders in or out quickly. Under the FCA's guidance in PERG 4.4, a loan to an individual secured on land where at least 40% is used as a dwelling can be a regulated mortgage contract. A company that is not acting as a trustee, borrowing for its business against its own property, generally falls outside that regime.
That split shapes the market. Some lenders only do regulated lending to individuals, some only lend to companies, and some do both. EAL Holdings, for example, states that it currently lends to UK-registered companies only and does not lend to consumers. If you are buying your family home in your own name, you need a lender or broker that offers regulated bridging, and you should check its authorisation on the FCA Register.
2. Check what security the lender will take
A chain-break bridge is usually secured on property: the one being bought, the one being sold, or both. Ask early which types the lender accepts and whether it will take a second charge behind an existing mortgage.
As a worked example, EAL Holdings says its property-secured finance covers residential, commercial and semi-commercial property, with first and second charges considered, from £100k to £500k and up to 75% loan to value. A company selling a shop with flats above to fund a new warehouse, for instance, would want to know both buildings are acceptable before paying for valuations.
3. Test the exit, not just the purchase
In a chain break, the exit is normally the delayed sale. Lenders want to see that it is real: a buyer in place, solicitors instructed and a price that still stands up. If the sale falls through altogether, the exit may need to change to a refinance or a sale to someone else, so think through that route too.
EAL Holdings says its decisions are led by asset value and exit strategy. Most specialist lenders take a similar view, which is why a clear, evidenced exit often matters more than the purchase itself.
| Exit route | Evidence a lender may ask for | Main risk |
|---|---|---|
| Delayed sale completes | Memorandum of sale, buyer's solicitor details, agreed price | The buyer pulls out or renegotiates |
| Sale to a new buyer | Agent's marketing advice and recent comparable sales | A lower price or a longer wait |
| Refinance onto a term mortgage | Rental income, tenancy or lease details, a term lender's appetite | The property does not meet term lending criteria |
4. Work out the full cost in pounds
Bridging is short-term credit, and the total cost depends on more than the headline interest figure. Ask every lender for a written breakdown of interest, arrangement and exit fees, valuation and legal costs, and the net amount you will actually receive.
Also ask how interest is paid. Rolled-up interest is added to the loan and repaid at the end, which helps cash flow but grows the balance. Serviced interest is paid monthly. EAL Holdings offers both options. Whichever you choose, model what happens if the delayed sale takes longer than expected, because each extra month adds cost.
Put the figures in a simple spreadsheet: the loan amount, every fee, the interest for the expected period and for two or three months beyond it. Compare that total with what the company would lose if the purchase fell through, such as a deposit or a deal it cannot replace. Sometimes the bridge is clearly worth it. Sometimes it is not.
5. Ask what kind of credit search happens, and when
Directors often enquire with several lenders at once when a chain breaks. Hard searches are visible to other lenders, so it helps to know which lenders start with a soft search.
EAL Holdings says enquiring does not leave a footprint on the credit file, because only a soft search is made, and a hard search is carried out only if you proceed after receiving an indicative offer. Ask the same question of every lender before you share your details.
6. Get the paperwork ready before you call
Speed in a chain break usually comes down to how quickly you can answer the lender's questions. Have these ready:
- the purchase contract or heads of terms, and details of the property you are buying;
- evidence of the delayed sale: the memorandum of sale and solicitors' details;
- 6 to 12 months of business bank statements and recent filed or management accounts;
- proof of identity for all directors;
- details of any existing mortgages or charges, which you can cross-check on Companies House;
- a short note of the exit plan and the fallback if the sale slips.
That list matches what EAL Holdings says it typically asks for, and it is a sensible starting point for most lenders. Its credit team typically calls within one business day of an enquiry to discuss the case with an underwriter.
7. Understand any personal guarantee and plan a fallback
Lending to a company does not always keep the directors' own assets out of reach. Many lenders ask for personal guarantees, and the British Business Bank describes a personal guarantee as legally binding, making the director personally liable if the business cannot repay. Ask whether one is needed, whether it is capped and when it ends, and take independent legal advice before signing.
Then write down your plan B. If the sale is late, can the loan be extended, and on what terms? Could the property be let to cover interest? A lender that discusses these questions openly at the start is easier to work with if things change.
How we put this checklist together
We based each check on official guidance from the FCA, Companies House and the British Business Bank, and on the published criteria of one specialist lender, used as a worked example. We did not compare interest rates, because pricing depends on the property, the borrower and the exit, and changes often.
Frequently asked questions
Can a limited company use a bridging loan to break a property chain?
Yes. Many specialist lenders lend to companies against property for this purpose. EAL Holdings, for example, lists chain breaks among the typical uses of its property-secured finance for UK-registered companies.
Is a chain-break bridging loan for a company regulated by the FCA?
Generally not, where a company borrows for its business against its own property, according to the FCA's PERG guidance. That means fewer protections, so read the terms carefully.
What happens if the delayed sale never completes?
You would need another exit, such as selling to a different buyer or refinancing. Agree in advance what the lender expects and whether the term can be extended.
Can I get a chain-break loan with a less than perfect credit history?
Sometimes. EAL Holdings says it does not require a perfect credit history and assesses adverse credit case by case, but every lender sets its own criteria.
Sources
- FCA Handbook: PERG 4.4, regulated mortgage contracts
- FCA Financial Services Register
- GOV.UK: Get information about a company (Companies House)
- British Business Bank: guide to personal guarantees
General information only, not financial, tax or legal advice. Bridging finance is credit secured on property, which may be at risk if the loan is not repaid, and personal guarantees put your own assets at risk. Check terms carefully and take independent advice before you borrow.