Commercial real estate transactions frequently involve time-sensitive expenses. From closing costs to getting construction permits and even working capital to pay contractors for renovations on a fix and flip project, having funds on-hand can help keep projects on track. However, gaps in capital can cause delays in projects or force commercial real estate investors to miss out on time-sensitive opportunities. To prevent these issues, property investors use bridge loans.
How Bridge Loans Work
Bridge loans can be arranged quickly to fill gaps in capital between or during projects or while larger financing is still in the pipeline. The bridge loan is structured around the value of the property and can be used for acquisitions, renovations, refinancing and raw land development. Bridge loans can be up to 36 months and usually have no prepayment penalties, which gives commercial real estate investors added flexibility. Bridge loans also have interest only payments with a balloon payment at the end of the term. Some commercial real estate investors roll the amount of the bridge loan into larger financing. That way, they can make use of the funds immediately and then pay off the balance once the larger financing is made available.
Who Uses Bridge Loans?
Bridge financing in general is nothing new. Business owners in all kinds of industries use some form of bridge loan to smooth out revenue cycles or to fuel growth when capital is short. Apart from real estate other acceptable forms of collateral for a bridge loan include account receivables and purchase orders. In the world of commercial real estate, bridge loans are very versatile. Property flippers use bridge financing to get from the initial purchase to renovation to listing the property for sale. Real estate developers use it for quick time sensitive acquisition, expansion of existing properties, remodeling and ground up construction projects.
Get the Financing You Need
If you need a bridge loan for commercial real estate transaction or to keep a project on track or to fuel growth with capital is short, contact the team at The Capital Rams today. We can arrange bridge financing quickly and efficiently so you can access the funds you need, when you need it. Reach out to our team today to get started.