Bridge loans, also called hard money funds are used by real estate investor to buy new properties. They are known as hard money because they are based on hard assets such as real estate. The term “bridge” shows that the money is used to connect potential buyers with another asset through facilitating the financial gap that is available.
Traditional financial institutions like banks cannot fill this gap because the processing of their loans takes longer and lacks flexibility. Bridge loans offer immediate solutions where the lender gives an investor the required funding to help him complete property purchase transaction immediately, while bypassing all the constraints that are posed by conventional financial institutions. The term for bridge loans ranges between three to twelve months. These types of loans are used to bridge the gap when long-term funding is not available.
Bridge loans are high-interest-rate; short-term investments that will help real estate investors close on a property purchase deal faster than waiting for the banks to process the loans which may take a lot of time. The borrower uses the long-term funding to pay back the bridge loans he obtained when buying the property. However, borrowers will pay higher interest rates for the bridge loans. Clopton Capital is a reputable commercial bridge loan service provider who can lend more than $40 million.
Advantages Provided by the Commercial Bridge Loans
As mentioned earlier, traditional financial institutions are not flexible enough to respond promptly when an opportunity to buy property rises briefly. Bridge loans are processed faster to help investors take advantage of emerging property offers. This gives you an additional investment while you wait for other properties to sell.
Filling the Gap
A bridge loan offers you the required funding while you wait for your other properties to be sold in the market. They provide quick capital to help investors to purchase properties that are auctioned off or properties that have several offers and cannot be settled using a contingency-based bidding. A foreclosed real estate may be on the market and requires swift action.
Bridge loans are used to buy out business partners who wish to pursue other business opportunities elsewhere, which is beneficial to you as the sole proprietor of the business. In this case, funds may first be obtained using a mortgage loan. The lender finally becomes your investment partner. And we all understand that partnerships do not last for long. However, many lenders will check the creditworthiness of the borrower before giving out the loan.
In some instances, your collateral will have large interest reserves to help you obtain a higher loan amount. Some lenders will also give you flexible repayment plans.
Opportunity and Timing
Take a moment to think about this- let’s say that you are a real estate investor and you have come across a lifetime opportunity to buy rental properties – you move around looking for funding, but unfortunately, you realize that even if you obtain that lender for the specific rental properties- the opportunity to purchase these properties will have vanished by the time your financier will have completed doing due diligence on your proposed rental properties. That is one of the advantages that you will get by using commercial bridge loans. With these quick bridge loans you will not feel guilty that you missed an opportunity to buy any prime commercial or residential property. This implies that you will be able to seize any opportunities that arise using bridge loans.
Flexibility and Adaptability
Bridge loans are generally more flexible than the conventional loans from financial situations. Investors can rest assured that they will not miss any opportunity when depending on bridge loans for financing because they are processed faster and on time.
Applying for loans from traditional financial institutions like banks can be stressful and complicated, particularly for first-time property investors. Borrowers are required to submit various documents, including collaterals, job statements, which make the process completely overwhelming. But for bridge loans you do not have to follow so many formalities for your loan is approved.
Unlike traditional loans, there are no detailed specifications that are set for those who want to acquire a loan; in fact, you can negotiate with lender to give you the loan amount that will suit your business needs.
Bridge loans are ideal for property investors who want immediate funding to buy or complete their real estate investments. It allows investors to respond promptly to any real estate opportunity that comes their way. The lenders of these loans understand the importance of timely funding to help you achieve your goals.