Second Charge Bridging Loan: Commercial Freehold Purchase
A small business owner had been trading from a leased commercial property for two years when the landlord decided to sell the freehold. With a purchase price of £120,000 and no readily available liquidity, Aura Capital arranged a second charge bridging loan secured against the borrower's jointly owned main residence — accommodating an adverse credit history and an 18-month exit via planned residential sale.
The Situation
The borrower — a UK national operating a convenience store — had been trading from a leased commercial property for approximately two years following the business acquisition. The arrangement had worked well, but the situation changed when the landlord decided to sell the freehold. The purchase price was £120,000 — a straightforward transaction in commercial property terms — but one that required capital the borrower did not have readily accessible.
Purchasing the freehold made strong commercial sense. The borrower was already committed to the location through the business, had established trade from the premises, and faced the uncertainty of a new landlord — potentially with different terms, rent reviews, or intentions for the property — if someone else acquired it. Owning the freehold would remove that uncertainty entirely and add a capital asset to the business balance sheet.
The borrower's main residence — held jointly with a family member — had an existing first charge residential mortgage in place. The available equity was sufficient to support a second charge bridging loan, secured behind the existing mortgage, to fund the commercial purchase.
The Complexity: Adverse Credit and Joint Ownership
Two factors added complexity to what would otherwise have been a clean second charge bridging case.
The first was the borrower's credit profile. The adverse credit history — a CCJ under £750 and recent missed payments under £1,000, both within the last 24 months. Assessed in context, and against a well-secured, low-LTV application, it was manageable. For borrowers in a similar position, our bridging loans for bad credit page sets out our approach to adverse credit cases in more detail.
Automated valuation — no physical valuation required. At the LTV available against a £600,000+ residential security, the lender's position was well-protected.
The second factor was joint ownership. The main residence was held jointly by the borrower and a family member. A second charge on a jointly owned property requires all legal owners to be party to the charge — meaning the family member's consent, identity verification, and independent legal advice were required as part of the process.
What Is a Second Charge Bridging Loan?
A second charge bridging loan is a short-term facility secured against a property that already has a first charge mortgage registered against it. The bridging lender takes a second ranking security position — behind the existing mortgage lender — and lends against the available equity in the asset.
Second charge bridging is commonly used where a borrower needs to raise capital quickly without disturbing or repaying their existing mortgage. In this case, the borrower's existing residential mortgage was on favourable terms and would have incurred early repayment charges if broken. A second charge bridge accessed the equity without touching the first charge — preserving the existing mortgage arrangement while funding the commercial purchase.
No new valuation was required to assess the residential security. The facility was structured using our second charge no valuation bridging loan product — a desktop assessment of the main residence removed the cost and delay of a formal RICS instruction, which mattered given the borrower's stated need to complete as soon as possible.
The facility was structured as an unregulated bridging loan — the funds were being raised for business purposes (the purchase of a commercial freehold), not for personal or consumer purposes — which allowed for greater structuring flexibility and faster execution than a regulated product would have permitted.
How Aura Capital Structured the Deal
The facility was structured at a net day one advance of £88,966.50, with interest retained at 0.95% per calendar month over an 18-month term. Retained interest — where the full interest cost for the term is deducted upfront from the gross facility rather than being paid monthly — was appropriate here given that the security was owner-occupied and generating no income from which to service monthly payments.
The 18-month term was set to give the borrower adequate runway to complete the commercial purchase, stabilise their position, and progress the planned sale of the main residence — the proceeds of which form the exit for the bridging facility. The borrower intends to relocate following the purchase, with the sale of the current main residence providing both the exit from the bridge and the equity to fund the move.
Lender selection was the critical structuring decision. Second charge bridging on a jointly owned main residence, with adverse credit and a relocating commercial purpose, is a combination that narrows the available lender pool significantly. Aura Capital identified lenders with appetite for this specific profile — those who lend to adverse credit clients with no valuation required, are comfortable with joint ownership structures and a relocation-driven exit, and can underwrite a business-purpose second charge at this LTV.
The Numbers
| Security | Residential freehold main residence |
| Ownership | Jointly owned — borrower and family member |
| Security value | £600,000+ |
| Existing first charge | £314,413 (residential mortgage) |
| Charge position | Second charge |
| Net day one advance | £88,966.50 |
| Rate | 0.95% per calendar month |
| Interest | Fully retained |
| Term | 18 months |
| Valuation | No new valuation — desktop assessment |
| Purpose | Purchase of commercial freehold — leased trading premises |
| Commercial purchase price | £120,000 |
| Adverse credit | CCJ under £750 · Missed payments under £1,000 |
| Exit strategy | Sale of main residence following relocation |
| Borrower | UK national — individual borrower |
| Loan type | Unregulated — business purposes |
Why This Case Worked
The security was the anchor. A residential freehold valued at £600,000+ with an existing first charge of £314,413 leaves substantial equity — more than enough to support a second charge net advance of under £90,000. Even accounting for the first charge position, the combined debt-to-value was conservative, and the lender's second charge security was well-covered.
The CCJs and missed payments are a specific and well-understood category within the specialist lending market. A lender who treats all adverse credit as equivalent, regardless of cause or timing, will decline cases that are fundamentally sound. Working with a lender who understands adverse credit and is able to take a view on the asset and the client's equity position is what made this case achievable — presenting the case with a full explanation of the circumstances rather than letting the raw data speak for itself.
The business rationale was clear and defensible. The borrower was not speculating on a commercial asset — they were purchasing the premises their existing, trading business had occupied for two years under a lease. The transaction reduced operational risk (removing landlord uncertainty), added a capital asset to the business, and made strong commercial sense independent of any property market consideration. That clarity of purpose was a material factor in the lender's comfort with the case.
The exit strategy — sale of the main residence following relocation — was supported by the borrower's stated intention and the straightforward saleability of a well-maintained residential freehold. The 18-month term provided adequate runway without overextending the facility unnecessarily.
Products Used in This Case
This transaction was delivered using Aura Capital's second charge bridging loan capability, structured as a second charge no valuation facility for business purposes, secured against a jointly owned main residence with an adverse credit profile. If you need to raise capital quickly for a commercial purpose and hold equity in a residential property, a second charge bridge may be the right solution — even with adverse credit on file.
Related products that may also be relevant include our bridging loans for bad credit for borrowers with more substantial adverse credit histories, and our commercial bridging loans range for direct security against commercial assets.
Need to Raise Capital Against Your Home for a Business Purpose?
Second charge bridging for business purposes — including borrowers with adverse credit — is assessed on the security, the LTV, and the exit strategy. Speak to Aura Capital directly for a same-day decision on what is achievable.
Get a QuoteThis case study has been fully anonymised to protect client confidentiality. All locations, identifying details, and specific addresses have been removed. Outcomes vary depending on individual circumstances. This does not constitute financial or legal advice.
