July 16, 2024

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All About Commercial Bridge Loans

All About Commercial Bridge Loans

Commercial Bridge Loans Made Easy

A commercial bridge loan is a great way to secure temporary financing on a commercial property. A bridge loan is designed for financing that is used when a borrower is expecting to sell a property quickly or refinance it within the near future. It is a “bridge” of fonancing until permanent financing can be obtained.

A good commercial mortgage officer can offer loans on a variety of commercial properties including apartments, retail, industrial, office, health care and mixed use. The one thing that borrowers need to know when securing commercial bridge financing is that many commercial lenders always look for an “exit strategy” to be certain that borrowers have a plan to retire the loan through selling or refinancing the property. Bridge financing is usually offered for terms of 12-24 months and many can be refinanced into low cost, long-term financing through a good commercial lender. Commercial bridge loans are not only for shorter terms, but are also often needed to close quickly.

An example of a bridge loan scenario is as follows: A borrower wishes to purchase a hotel, and is approved for a conventional SBA loan contingent upon two years of successful business operation. In order to fund the purchase the borrower arranges for the seller to Carry-back 30% of the purchase price, and secures a loan for the remaining 70%. The loan allows the borrower to acquire the property and establish the operating history necessary for long-term financing.

Many investors understand the importance of a bridge loan. The cost of the loan may be much less than a joint venture partner or nor doing the deal at all!