A real estate bridge loan is a short-term financing option that helps individuals or businesses bridge a gap in funding when buying, selling, or refinancing real estate properties. A company would consider a bridge loan when quick capital is needed to seize an opportunity or complete a transaction, usually when traditional long-term financing is not immediately available.
Equipment Leases Inc is now making these loans available due to the demand from our extensive client base that prefer to deal with us for all of their capital needs. We can fund up to $10,000,000 and can close and fund within five days. If your business needs a cash infusion and you have real property, then this may be a short-term solution to your current cash flow need.
Bridge loans are always short-term, between 90-days to 1-yr. Most bridge lenders try to stay under six months and provide interim financing to cover the period between a property purchase or sale and the availability of permanent funding, such as a mortgage or long-term loan.
Bridge loans are known for their relatively fast approval and funding process, allowing borrowers to access the necessary funds within a short period, sometimes as quickly as a few weeks. Equipment Leases and their lending partners can usually fund a real estate request within 4 to 5 days.
Bridge loans often have higher interest rates than traditional mortgage rates as the lenders, representing private capital, assume much of the risk. These private lenders charge various rates based on the land or building owners' circumstances. The cost of this capital is higher than bank rates but always a welcome relief to the owner in need.
The property being bought or sold typically serves as collateral for the bridge loan. Lenders assess the value of the property and the borrower's ability to repay the loan. Most want a first position on the property but will also take a second, depending on the situation.
Lenders often require borrowers to have a clear exit strategy, meaning a plan for repaying the bridge loan. This exit strategy could include selling the property, obtaining long-term financing, or refinancing.
While credit history and financials are a small part of the lenders' underwriting process, bridge loan lenders may emphasize the property's value and potential as collateral.
A bridge loan becomes an excellent option if a business owner has a short-term cash flow problem and has real estate that is free and clear. The urgent nature of the business, such as payroll, operations, utilities, balloon payments, etc.
Investors or property developers might use a bridge loan to fund renovations or improvements on a property before securing long-term financing. In the current banking environment, most banks are trimming their real estate exposure and, in some cases, even withdrawing construction loans.
Investors might use bridge loans to quickly acquire properties at auction or in competitive markets where traditional financing may take too long to secure.
Real estate professionals who buy properties to renovate and resell quickly might use bridge loans to cover the purchase and renovation costs.
It’s important to note that bridge loans are a specialized form of financing and come with associated risks and costs. Borrowers should consider their ability to repay the loan within the short term and the potential costs involved. Additionally, working with reputable lenders like Equipment Leases and seeking professional advice is recommended when considering a real estate bridge loan.