The improving economic climate for commerce and industry has led to the creation of many lending alternatives to the traditional bank financing. Bridge loans are designed to support commercial property transactions, auction purchases, renovation and development projects. They are being used in all types of investment made across the United States with great frequency. More and more business owners acknowledge how to obtain a short-term credit and use received in such manner money to thrive on their companies.
Definition of “Bridge Loan.”
A bridge loan is essentially a short-term (12 months or less) that is often arranged in the short run and gives fast access to cash for commercial needs. This type of lending is called so, as it serves as a juncture between the termination of one period of funding and the start of another, the most permanent source of funding. Fast, flexible and secure, it provides borrowers with the quick cash they need, which they may have been unable to secure elsewhere within a short period.
How does a bridge loan work?
The main difference between a bridge loan and any another is the time of processing. It can take days or even months for a traditional provider such as a bank to complete a deal, but this type of loan is usually faster and can be ready in less than 24 hours! If you decided to obtain this type of lending you may expect the following:
- A borrower provides a lender with a brief summary of company’s development and what for he needs additional capital.
- A lender gets the approval of the new property purchase and the price that should be paid for it.
- The parties issue an offer and discuss the terms and requirements to obtain this funding.
- Renewal of all the documents of the deal, where the terms and conditions are explained and parties sign them.
- After all the process a borrower gets the bridge loan money and profits.
Average fees for Bridge Loan
Short-term finance is always more expensive than long-term lending, however, with a great choice of alternative lenders it is competitively priced. The current interest rates range from 3,25-3,50% per month according to the latest prime rates made by Wall Street Journal. However, with many different lenders available in this field there may pay a variety of other fees to the lender. The lender usually charges a fee for providing a credit, and it is typically 2%. Some lenders may roll this fee into the total cost of the borrowing.
The decision whether to provide or not commercial bridge loan financing together with the interest rate depends on your company’s credit rating, income, stability and years in business. However, before applying you should weight all pros and cons.
Perks of getting Bridge Loan
There are many businesspersons who are willing to obtain commercial bridge loans, but what for they can use this money:
- To fill the gap in funding between buying and selling property when a sale is carried over
- To increase funding for the company
- To make renovations of the company’s premises
- To grow the business
- To buy at an auction
- To pile up
- To increase a deposit amount for purchasing new property
- To finance unexpected tax bills
Choosing a lender
There are a huge variety of short-term lenders available nowadays, and it is always difficult to choose one which can suite your type of business and your circumstances in full. Bridge loan can help you during this difficult time. Most banks are hesitating to lend some risky industries. However, alternative commercial lenders have a higher risk tolerance. They offer bridge funding as they tend to invest in U.S. economic.
Before you start looking for a commercial bridge loan provider, figure out your situation in full and decide whether it is the best option. That is why we offer you to find out all pros and cons of this type of funding.
800fund.com have helped hundreds of small business owners getting bridge finance for their projects, so do give a call (212) 865-3863 or just fill in the short online application form.