Commercial Bridge Loans and Your Small Business: A Closer Look

Commercial bridge loans may be a great option if you’re not able to qualify for permanent financing or if you are interested in getting financing for a property that requires major renovations or upgrades. It’s a flexible financing option meant to provide a temporary short-term loan until you’ve completed your exit strategy such as through a business refinance or sale.

Repayment Terms

The repayment terms on a typical bridge loan can be anywhere from six months to three years. After the term is up, the property will be sold or refinanced using more traditional permanent financing. This is why these types of loans are referred to as temporary bridge loans. The money loaned to you is temporary just to get you by until you can obtain permanent financing.

Types of Properties

You can use commercial bridge loans to finance or refinance an office building, hotel, retail store, certain real estate investments such as apartment complexes. If you are building on a plot of land for commercial purposes, you may even be able to get a commercial bridge loan for the land. If you have tried before to get financing for a property, then you know that flexible financing options like this can be hard to come by.

Benefits

This financing technique is a great option for many real estate investors because they can close quickly. Also, the loan amounts are based on the fully improved value of the property rather than the value of the property at the time of closing. In this way, you’ll be able to finance the property while making the payments necessary to upgrade or renovate. They are also a frequent favorite of investors because they can be used for non-owner-occupied property. If you’re interested in renting out the building while you do the renovations, you’re able to do so without interruption in your regular business.

Candidates for Financing

You may be a great fit for a commercial bridge loan if you need a space to do business in but don’t have a lot of cash to spare. Commercial bridge loans will give you a loan with flexible loan terms while you do upgrades and build equity in a property until the time you can get permanent more traditional financing.

Although these temporary commercial real estate loans may be a great option for many, you’d have to talk to a finance professional to make sure it’s right for you before you jump in. If you’re interested in purchasing a commercial property that needs an overhaul or major renovation, keep these key things in mind about commercial bridge loans to make sure this is something you want to do.

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