Commercial Bridge Loans

Business owners and investors are always on the lookout for real estate opportunities that will bring them one step closer to achieving their goals. Sometimes they see the potential in a commercial property for sale but know that due to the condition of the property, they will face insurmountable hurdles during the loan approval process. In these situations, a commercial bridge loan might be a suitable option.

Commercial bridge loans are a temporary financing solution to help borrowers “bridge the gap” between a property purchase and the ability to obtain permanent financing. They are often used to get a commercial property into a position to qualify for traditional financing options with favorable terms.

Bridge loans may cover capital expenditures, interest, and additional required reserves depending on the situation. Like other loan types, if the property has existing cash flow and the borrower has a solid financial profile, it’s likely to qualify for a program with better terms. If the borrower has credit concerns or legal issues, they should prepare to pay a higher interest rate on this type of loan.

Commercial bridge loans have several advantages for savvy borrowers. Here are the pros of this type of financing:

  • Bridge loans are often used to pay for rehabilitation efforts when a property does not qualify for traditional financing due to its condition.
  • Available loan amounts are determined by the project’s total cost.
  • The closing process for bridge loans is quick and hassle-free.
  • These loans allow borrowers to restructure their debt and equity when the loan stabilizes.

While commercial bridge loans provide a path for motivated business owners and investors, they are not the best choice for everyone. Here are a few of the disadvantages of commercial bridge loans:

  • These loans come with higher interest rates when compared to other financing options.
  • If the borrower has financial or legal problems on their record, they will be subject to extremely high rates.
  • These are short-term loans that usually require refinancing within a two-year period.

If you are looking for a creative way to finance your next commercial investment, we can help! Contact us today to learn how a commercial bridge loan can fit into your business plan.

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