An Introduction to Bridge Loan

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What is a Bridge Loan?

Bridge loans are a unique option for those that need a quick source of capital until they can find a more long-term financing solution. While bridge loans are most widely known for their use in real estate, this type of loan is also used to buy out partners, move business locations, or even boost a business’s credit score. Typically, bridge loans must be paid back anywhere from a few months up to one year.

Who needs a bridge loan?

As we mentioned, bridge loans are often used by business owners to tide them over while they figure out other financing options better for their future. However, bridge loans are also used by investors or buyers to purchase property fast without getting caught up in the lengthy approval process of traditional lending. Additionally, you can find developers utilizing this type of loan to continue their building timeline while waiting on others to close on their properties.

Why don’t more people use bridge loans?

Bridge loans can be a great asset when businesses are in a jam and need financing fast – but they do come with some negatives. Interest rates are expected to be higher than those of traditional loans as the loan length is much, much shorter. You will be expected to pay any closing costs when purchasing property and origination fees on loan.

How can you qualify for a bridge loan?

As with any loan, banks will look at your credit score and past payment history, along with the collateral being offered. For investors or businesses looking to acquire property, the building or property itself will often be seen as the collateral in the loan. Most bridge loans cover around 75% of the value of a property.

Where should you look for a bridge loan?

Bridge loans are offered by a multitude of lenders. Most often, banks can provide the best terms and rates and will probably be able to help you find long-term financing. However, there are also bridge loan options through the SBA and many online brokers.

In the business world, we understand how fast opportunities can fly by. Utilize a bridge loan to ensure you don’t miss out on an essential chance for your business to expand and profit! We’re here to help determine whether a bridge loan is a right fit for your business. Give us a call today for a consultation about your needs!