In essence, a bridge loan is one that is used by a borrower on a short-term basis, until some other debt has been relieved, or perhaps a property is sold and the income is made available to the borrower. The loan itself ‘bridges’ the gap where the borrower lacks funds over to the time frame when it is expected that more money will be available. The loan is often used to acquire additional property, and this is a common kind of transaction in commercial real estate arrangements.
Bridge Loans in Real Estate
There are several situations in commercial real estate where a bridge loan could be very helpful in solving a short-term cash shortage. For example, you may be facing a tight deadline for closing on a property, and you need to quickly acquire the necessary cash. It’s also possible that you might need to carry out some extensive repairs or maintenance for a property quickly so that you can sell it. Retrieving various properties from foreclosure might also force you to obtain cash very quickly so that you can capitalize on a great deal. Most bridge loans are repaid within two years or less, and it’s fairly common for them to be repaid faster when a specific property has been either sold or refinanced.
Benefits of Bridge Loans
The biggest benefit of obtaining a bridge loan is that it allows you to take advantage of a financial opportunity, even though you may not have had the financing yourself to do so. Most bridge loans are structured as non-recourse loans, which means they must be paid back through the actual property involved, and not by the borrower personally. This means the lender cannot force the borrower to repay the loan, even if the value of the property is not sufficient to cover the amount of the bridge loan.
Are You Interested in a Bridge Loan?
For many entrepreneurs, a bridge loan is a perfect solution to a funding problem they might have. If a bridge loan would help you, contact us at Monstera Lending Group, so we can discuss the possibility of arranging one for your small business.