The Basics of Bridge Loans in CRE

Secure the property you need today with a bridge loan. When you’re looking for commercial real estate, you may find the perfect investment opportunity. Instead of waiting for loan applications, appraisers and other delays that typically come with a conventional mortgage, discover how bridge loans can offer the rapid response you need.

What Is a Bridge Loan?

When you can’t wait for a commercial mortgage or can’t apply for one immediately, a bridge loan is used to fill the gap. There are many reasons why you may need a bridge loan. First, a property that’s an excellent investment opportunity may have high demand. When other investors and business owners are bidding on the property, you can’t wait for a slow approval process.

Another common use of a bridge loan is to perform renovations necessary for a mortgage. A commercial building that needs immediate repairs may not qualify for a mortgage. Instead of passing a hidden gem, purchase it with a bridge loan and use the additional financing to make the necessary renovations. Once your property is fully renovated, you can refinance with a commercial mortgage or another loan.

Typical Rates

Because of the short-term nature of a bridge loan, you’ll typically pay a higher interest rate. You’ll need to pay back the full amount in a shorter time frame than other types of financing, so you need a solid business plan in place to avoid late fees or a lump sum you can’t afford. Be prepared to pay slightly higher closing costs for your bridge loan as well.

Advantages of Using a Bridge Loan

When you use a bridge loan, you have the freedom to use your financing however you wish. The secure property quickly or invest in a fixer-upper commercial property that would otherwise be unavailable to you as an investment strategy.

A bridge loan may have slightly higher rates than a traditional loan, but it can be more competitive than business credit cards or lines of credit. Your bridge loan also allows you to access a significant amount of credit, which is necessary for purchasing large commercial properties.

Compare Lending Options Today

Compare bridge loans and other forms of financing today to determine the best course of action for your business. Whether you need a quick way to purchase a commercial property or you need a short-term loan while you renovate a property, a bridge loan is a popular option for many small business owners and commercial real estate investors.

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