What Are Commercial Bridge Loans & Why You Might Need One
Commercial Bridge Loans are loans that are taken out against one’s property (property is used as a collateral) that can help commercial real estate companies “bridge” (thus the name) the gap between their commercial real estate transactions. These loans are used to help companies avoid the “cash squeeze” that would otherwise come between purchasing commercial real estate properties if no such funding were available.
These loans are oftentimes used to bridge temporary gaps in the budget to help the business get to the next big real estate transactions that they will participate in. Many businesses find these commercial bridge loans especially helpful when a new piece of real estate is on the market only for a limited time or when there are multiple offers on the table and the company needs to get that piece to ensure that they are continuing to make new transactions on a regular basis.
Considering that these commercial bridge loans are usually shorter in the term, they are generally loans that have a higher rate of interest than other loans that last for longer periods of time. Generally, these loans only last from 6 months to 1 year, making them shorter term and making it so that the interest rates are up to 2% higher to help the company continue to make a profit on the many short-term loans they give out from year-to-year.
When permanent financing is placed on the next piece of real estate, the business will generally pay the commercial bridge loan back at that time. Even buildings like multifamily residential condos or apartments can use commercial bridge loans as they restructure their business or as they do upgrades to their units. Raising the rents afterward and filling more of the apartment units will help pay the bridge loan back in a more timely fashion.
In conclusion, the commercial bridge loan is a way that businesses can help finance their business until the permanent financing from the next real estate transaction comes through and the money is in their pockets. These loans make doing business easier for businesses and allow commercial real estate companies to otherwise take risks they would never be able to take without the capital to be able to do it.
For more information on how commercial bridge loans can help your business get ahead till the next transaction to take place please feel free to contact us atRoyalty Business Lending.