A commercial bridge loan is best described as a short-term loan, usually up to one year, that can be withdrawn by a company or an individual until they can secure permanent finances or remove existing obligation, which allows them to meet current obligations with immediate cashflow. Bridge loans may also be referred to as swing financing, gap financing or bridge financing and typically have an interest rate between 8.5 to 10.6 percent.
How Does A Bridge Loan Work?
As its name suggests, the bridge loan works by ‘bridging’ the gap in times when finances are needed but not made available yet. Corporations, as well as individuals, can make use of bridge loans, and lenders may choose to customize these loans under various circumstances.
Bridge loans may help landowners purchase newer lands or properties while waiting for their current ones to sell. Borrowers make use of the equity in their existing properties for the down payment on the purchase of a newer one while waiting for the current one to sell. The idea is to give the landowner extra time.
Banks, online lenders, private lenders (such as commercial hard money lenders) and other alternatives may issue these similar loan types.
Bridge Loans and Businesses
Businesses may turn to bridge loans while waiting for long-term finances but meanwhile need money to cover expenses in the interim (between a few months up to a year). In commercial bridge loans, the real estate being purchased serves as collateral to secure the loan.
Bridge Loans and Real Estate
Bridge loans are readily made use of in the real estate industry, allowing users to take advantage of real estate opportunities. In case a buyer experiences a lag between the purchase of one property and the sale of another, they may readily opt for a bridging loan. Moreover, these loans can also be used to fund a renovation project immediately.
More often than not, lenders tend to offer real estate bridge loans to borrowers with low debt-to-income ratio and excellent credit ratios. This loan rolls the mortgage of both properties together to provide the buyer maximum flexibility as they wait for their older property to sell. These loans usually account for 80 percent of the two properties’ combined value, so if you’re thinking about signing up for one, keep ample cash in hand and substantialequity in the original property.
How Are Bridge Loans Better Than Traditional Loans?
Bridge loans are known to have a speedier application, approval and funding process altogethercompared to traditional loans. These loans are a convenient option for borrowers who wish to gain fast access to funds for which they are ready to pay off relatively high-interest rates.
Have the banks said no? Don’t you worry, because, at Commercial Private Equity, we say yes to commercial bridge loans. We offer real estate backed programs for bridge loans under the following circumstances: a small bridge loan of $1,999,999 and under, for a duration of 12 to 24 months and large bridge loans of $2,000,000 and over, for 24 to 36 months. Hard money loans have never been this easy, Atlanta, GA. Request a loan today!