Bridge financing is a key component – in fact often it’s a required component to completing a purchase or refinance of a commercial property.
Commercial bridge loans simply provide short term, immediate finance solutions when the project, property, or borrower is not ready (or does not qualify) for permanent financing.
The reasons borrowers obtain commercial bridge products are many and varied, but a few examples are:
1) Urgency of the Transaction
If the borrower needs to move quickly, bridge loans can fund in as little as 10-14 days. Within that time frame, traditional CRE financing (including SBA loans) is not an option. The borrower will use the loan proceeds as a “bridge” to a long term, permanent loan.
2) Credit When the borrower needs to increase their credit score or allow a credit event to properly season
3) Occupancy When the subject property has insufficient occupancy rates
4) Project Completeness / Stability If the project itself is unfinished or the team is not fully in place yet
By their nature and in the spirit of serving a particular purpose, bridge loans will have shorter terms, higher rates, and no prepayment penalties. A properly executed bridge loan is often a critical feature in the arc of the project, so as always, choose your lending partner carefully.