What Can Your Company Accomplish with a Commercial Bridge Loan?
A bridge loan is quite literally a financial bridge, which helps your company move seamlessly from one business transaction to another. This way you can move onto the next business opportunity while your previous transaction is processing or under construction. These loans are quick-closing and short-term, which allows you to take advantage of time-sensitive purchases or make payments on property until permanent financing is received. They are utilized by many commercial real estate investors and developers in helping them tackle more projects and earn more profit than otherwise possible.
Commercial bridge loans can be used to make your company more efficient overall by reducing the number of breaks in between transactions and increasing the amount of work you take on. For instance, when your company purchases a retail space that needs remodel work, you can obtain this loan to get working toward your next property investment while your retail space is under construction. So rather than waiting around for your current project to be finished, you and your employees can be busy working on the next transaction.
Typically, a bridge loan has a 6-12-month term and usually doesn’t have a prepayment penalty. This gives your business the option to pay the loan off quickly and move on to the next sale. This helps to decrease the interest paid and increase your yearly transactions, both of which can increase your company’s overall profit. Many lenders are even willing to extend past the 12-month mark to give you more time to sell or finance your current property.
Another benefit of a bridge loan is the short closing time. It usually takes 15-30 days for the loan to close, possibly less time if you find a reliable lender to work with regularly. This allows your company to take advantage of time-sensitive deals like foreclosures or desperate sellers. Paying less for property by jumping on these deals will make an outstanding difference in the profit you bring in upon resale.
Even with the interest paid in these short-term loans, you’ll see your profit continue to increase as you multiply the amount of transactions you make throughout the year. As you begin to use commercial bridge loans to bridge your transactional gaps, you’ll get into a good flow and be able to use them efficiently. Your company can accomplish much more by utilizing bridge loans in its real estate transactions. They’re fast, easy, and flexible, which is great for anyone in the commercial real estate industry.
