In the fast-paced world of commercial real estate, borrowers often find themselves in situations where timing is everything. Commercial bridge loans can make all the difference for being able to seize upon a commercial real estate opportunity or complete a project. This article highlights the fundamentals of commercial bridge loans so that borrowers are better informed about this often-misunderstood financing option.
What Is a Commercial Bridge Loan?
First, let’s clarify what a commercial bridge loan is and how it differs from other private lending options. As the name suggests, commercial bridge loans are short-term loans designed to bridge the financial gap between a borrower’s immediate capital needs and longer-term financing solutions. Whether the borrowers wants to acquire property, renovate an existing one, or cover cash flow gaps, a commercial real estate bridge loan can meet short-term financial needs.
Commercial bridge loans offer several key benefits that set them apart from traditional mortgages. By understanding the role of commercial bridge loans and working with experienced direct lenders like Enact Partners, borrowers may be able to understand what it takes to secure a bridge loan to overcome short-term financing challenges to complete or enhance their real estate projects.
In commercial real estate, opportunities come and go quickly. A bridge loan becomes an attractive choice when a borrower requires quick access to funds to close a deal. Enact Partners specializes in a loan application process that features quick approvals and cash disbursement with minimal paperwork and hassle for qualified borrowers.
While traditional bridge loans through a bank usually take months to finalize (if even available), commercial bridge loans through Enact Partners can take as little as seven days to close. Of course, approval and speed to close all depend on the project, the borrower’s qualifications, and ease of access to necessary information.
Advantages of Commercial Bridge Loans
Facilitate Quick Access to Capital: Working with a private lender like Enact Partners, commercial bridge loans can be secured quickly – providing borrowers fast access to the capital they need to act swiftly in competitive real estate markets. The ability to access funds quickly means commercial real estate investors, builders, and developers can increase their chances of securing a desired property or complete projects on schedule that otherwise might be delayed.
Enable Borrowers to Bridge the Gap: Sometimes a short-term financing solution is all a builder or developer needs to complete a project on time and/or so that it starts earning operational income (such as an apartment building). This allows borrowers to take care of short-term needs while exploring longer-term financing solutions.
Fund Renovations or Repairs: Commercial bridge loans can also finance renovation or repair work, enhancing a real estate project and its value for sale, leasing, or rental.
Other Aspects of Commercial Bridge Loans
Fees and Interest Rates: Interest rates and associated fees are typically higher with private lenders on all loans types. This reflects the value-add of working with a private lender like Enact Partners, which is easier, faster, and more flexible for borrowers compared to working with banks. For short-term loans, like commercial bridge loans, the overall cost to borrowers is generally not that much different than a longer-term loan through a bank.
Loan Terms: Commercial bridge loans are not meant to be long-term solutions. They act as short-term loans, usually 12 to 36 months in length. Their role is to provide borrowers with quick access to the capital they need to purchase land, fund renovations, and make other improvements while they seek long-term financing.
Can Be Easier to Qualify: Banks and other institutional lenders often have strict qualification requirements or general lending guidelines that don’t take into consideration the individual merits of borrowers and their commercial real estate projects. In comparison, private lenders tend to focus more on the potential profitability of a project.
Flexibility: Given the right circumstances, private lenders like Enact Partners are often willing to explore commercial bridge lending opportunities with vacant commercial buildings, movie theaters, vacant land, and other special uses that banks would not consider.
Asset-Based: Qualifying for a commercial bridge loan is usually asset-based, meaning the private lender is primarily interested in the property’s value as collateral when the project is completed. This can make it smoother for borrowers to get approval. Enact Partners relies on the borrower and whether the project has solid financials to inform its lending decisions.
Evaluating Lenders: Evaluating lenders is important to ensure they’re a good fit. Borrowers should look for private lenders with expertise in commercial bridge loans. Enact Partners’ extensive background in real estate development and lending allows them to offer fast, flexible, no-nonsense access to capital for horizontal and vertical improvements, property purchases, fix-and-flips, real-estate-backed investment opportunities, and more.
Communication: Look for lenders who are responsive and easy to communicate with. The best way to achieve objectives is through open communication and clarity. Enact Partners keeps borrowers informed and engaged every step of the way, from application to approval to closing . . . and beyond.
Contact Enact Partners About Your Borrowing Needs
Commercial bridge loans can be an essential tool for commercial real estate investors, developers, and builders. By understanding the fundamentals of commercial bridge loans and working with trusted professionals like Enact Partners, borrowers can make informed decisions to unlock the benefits of commercial bridge loans for their real estate projects.
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