Discover What Is A Commercial Bridge Loan And How It Can Help You
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Sometimes there is a gap between the closing date of a property and the date that long-term financing will be accessible. In such cases, the investor need not pass on these real estate purchases, because it is possible to take out a "bridge loan". Those who are wondering what is a commercial bridge loan, will find this guide to be of assistance.
Financial bridging is intended as a temporary measure that can be implemented for anywhere from two weeks to three years until the investor has more long-term arrangements in place, which will then be used to repay the bridge loan. The loan-to-value ratio is lower, amortization period shorter, and interest rate is higher but less documentation is needed to secure this type of financing.
The most common purpose for these loans is to enable timely investments that would otherwise not be possible due to timing or circumstances that are not in favor of obtaining traditional financing. The higher risk status of these clients is the main reason why the interest rate is higher.
Banks deal with lower risk applicants and require substantially more in the way of documentation before they will approve any borrowing. Those who are in search of bridge financing will normally turn to individual lenders, private companies, or investment pools.
The maximum loan-to-value ratio for commercial properties is 65 percent, based on it appraisal value. The loans may be either closed, which only guarantees its availability for a specific time period, or open, without a fixed date by which it must be paid off, at least not for some time. Subsequent bridge financing may be available for a lower interest rate as the risk is less.
An example of one application of bridging financing is to cover property purchase or improvement costs while the developer waits for a required permit to be approved. Once the project is given the green light and a standard form of financing is secured, this will be used to pay back the first one. It can also be used to acquire equity for a property one currently owns for the purpose of purchasing additional real estate, then using the sale of the former to repay the financing.
During changes in management of a business, it can also be helpful to acquire this sort of financing as it provides funding until a new investor is found. The purchase of auctioned-off properties, or quick-buy discount investments, is also enabled through bridging options that can make things happen more quickly than most traditional forms of lending.
Financial bridging is intended as a temporary measure that can be implemented for anywhere from two weeks to three years until the investor has more long-term arrangements in place, which will then be used to repay the bridge loan. The loan-to-value ratio is lower, amortization period shorter, and interest rate is higher but less documentation is needed to secure this type of financing.
The most common purpose for these loans is to enable timely investments that would otherwise not be possible due to timing or circumstances that are not in favor of obtaining traditional financing. The higher risk status of these clients is the main reason why the interest rate is higher.
Banks deal with lower risk applicants and require substantially more in the way of documentation before they will approve any borrowing. Those who are in search of bridge financing will normally turn to individual lenders, private companies, or investment pools.
The maximum loan-to-value ratio for commercial properties is 65 percent, based on it appraisal value. The loans may be either closed, which only guarantees its availability for a specific time period, or open, without a fixed date by which it must be paid off, at least not for some time. Subsequent bridge financing may be available for a lower interest rate as the risk is less.
An example of one application of bridging financing is to cover property purchase or improvement costs while the developer waits for a required permit to be approved. Once the project is given the green light and a standard form of financing is secured, this will be used to pay back the first one. It can also be used to acquire equity for a property one currently owns for the purpose of purchasing additional real estate, then using the sale of the former to repay the financing.
During changes in management of a business, it can also be helpful to acquire this sort of financing as it provides funding until a new investor is found. The purchase of auctioned-off properties, or quick-buy discount investments, is also enabled through bridging options that can make things happen more quickly than most traditional forms of lending.
About the Author:
Tom G. Honeycutt is a full-time real estate entrepreneur in Atlanta, GA. Tom helps readers by providing practical and useful knowledge to better understand lending choices. If you are looking for Hard Money Commercial Loan Lenders | Atlanta, GA He suggests you check out the website iFund International.
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