Conventional commercial financing is not too easy to obtain if the borrower has a bad credit history or if the property is unstable. It also takes time to secure commercial financing when the borrower lacks time to close the transaction. However, if you see a real estate opportunity that will definitely pay dividends, know that you have the choice when it comes to finding financing, and this comes in the form of commercial financing with bridge loans.
What is a bridge loan?
Bridge loans, as the name suggests, serves as a bridge to a more permanent financing option by allowing borrowers to build / improve their credit history or stabilize properties. However, inappropriate credit history is not the only reason the borrower may seek a bridge loan, because there are many examples when commercial financing with bridge loans is searched when time is essence.
Bridge lenders, who are generally private lenders, basically consider the value of property and its feasibility, compared to undergoing the financial history of the borrower. Therefore, which basically secures a loan is the value of property. The general payment period for bridge financing between six and 18 months, although this can also be expanded to around three to five years in several cases. Funds obtained through bridge loans are also commonly referred to as’ hard money or ‘personal money’ loans.
What should you expect:
When you are looking for a bridge loan, expect lenders to ask the reason for applying for a type of financing and the release of strategies that conflict with conventional financing. As mentioned above, the reason you can be accelerated by cleaning funds, or to build a good credit history. Capital Providers Bridge will also evaluate investment as a whole, and this will cover aspects such as guarantees, cash flow, solid payment options, location and conditions of the property you want to invest, etc.
Even though you can comfortably expect to get 60% to 65% financing for your income generating some commercial real estate investments tenants through bridge loans and 50% for empty properties, but this number can also rise to 80% depending on the type of property and cash flow that it produces. However, lenders will need more equity for special purposes or single purpose nature such as gas stations, property lives and automatic dealer properties. This loan at the value is basically in its place so that lenders can be protected if the default borrower on the loan provided.
The minimum loan amount for commercial bridge loans and lending costs varies for each lender. In addition to investing in commercial real estate, these funds can also be used for the foreclosure or bankruptcy bail, purchasing partners, rehabilitating existing properties, for repurchasing mortgage discounts, etc.