Commercial real estate financing can take many different forms. Some borrowers are looking for a permanent financing option as they look to execute their long-term investment strategy. Others need a more short-term solution in the form of a transitional, or “bridge” loan. Here is a quick rundown of this type of loan – perhaps it’s the idea solution for your current financial needs.
It’s a Transitional Loan
As the name implies, a commercial bridge loan is something a commercial real estate investor would consider when looking to secure a temporary loan to "bridge" the interval needed to start a project and to obtain a more permanent loan. In some cases, the investor needs funding to help pay for property improvements. In other situations, the money is used to help re-tenant a property. In a general sense, the transitional loan is a stop-gap measure meant to better position an investor and their property for a more attractive finance solution.
It Can Add Value
A commercial mortgage bridge loan can be used to improve a property and increase its value. When used strategically for repairs or renovations, this can quickly make a building more appealing and add to its sale value, giving you an opportunity to generate more income in the future.
The Interest is Higher
Since bridge loans are shorter in nature than a typical loan, borrowers can expect to receive a higher interest rate as well. Plan ahead to see how your repayment amounts and schedule will be affected by these increased interest rates to see if this loan still makes sense.
Exit Strategy is Required
Borrowers can run into difficulties if they are not able to secure permanent financing before they end of the bridge loan’s term. If you don’t have a clear exit plan or you feel unsure of your ability to complete your short-term strategy in the time allotted, perhaps a transitional loan would not be the best option for you.
If you think you're ready for a commercial mortgage bridge loan, then apply now! Talk to us and explain what your project is. We can help you get the financing that makes sense for the phase you're in and help you to get to the next stage in your investment strategy.