What are Commercial Bridge Loans and How Do They Work?

Are you in a financial pickle and you need a quick way out? While there are several options that you can implement to get yourself out of a rut, commercial bridge loans are built to handle this kind of situation.

Commercial bridge loans deal directly with commercial properties - it’s all in the name. This loan can be a great option for those who don’t yet qualify for other types of loans, or who are in a waiting period before receiving money from other financing options.

If you want to learn more about quick bridge funding, the following guide will walk you through the basics of commercial bridge loans and how to use one to your advantage.

What Exactly Are Commercial Bridge Loans?

Commercial bridge loans exist in the real estate world, and they are established to help people with the purchase of commercial land or buildings. More specifically, these loans are available to help those who are not able to get permanent financing, or who do not qualify for other types of loans.

Bridge loans can last anywhere from 6 months to three years. This assists in the purchasing of commercial property, along with the renting, selling, or refinancing of said property.

The most common use of commercial bridge loans is to purchase hotels, offices, retail commercial properties, or even commercial apartment complexes. Sometimes, commercial bridge loans are used on land as well.

How do Commercial Bridge Loans Work?

These kinds of loans are often a risk for lenders. However, most lenders are willing to make that risk since the loan lasts for such a short period of time. Instead of basing their financial decisions on a loan to value (LTR) rate, they instead will determine commercial bridge loans based on the after-repair value (ARV).

In essence, when you apply for a commercial bridge loan, you are betting on how valuable the property will be in the future. This can serve as a great alternative to establishing a loan based on the current value of the property.

In What Other Ways Can Bridge Loans Be Used?

Other than using a quick bridge loan to purchase and repair commercial land, there are several other reasons why someone may want to invest in a commercial bridge loan.

If you are a borrower, you may be eligible for this kind of loan if you:

- Have a poor credit profile

- You do not have complete ownership of the property

- The property does not yield good occupancy rates

- You cannot wait for your permanent financing applications to come through

- The beauty of a commercial bridge loan is that you can get approved for one quite rapidly. If you need the loan in a hurry, you can use this to bet on the future value you’ll be putting into the home.

How Do You Qualify For A Commercial Bridge Loan?

Qualifying for a commercial bridge loan can be simple, but the standards and rates will always be different from lender to lender.

In general, you will want to have a credit score above 650 to qualify for this kind of loan. Again, though, some lenders may approve you with an even lower score. You also need to have all financial statements and documentation available to show your lender. The bank will only approve a loan if they can see your plans to renovate and sell the property in question.

The bottom line is, a commercial bridge loan will help you if you are in need of mega renovation funding. When you purchase a commercial property, you probably already have an idea in mind of how the property is going to turn out. When you estimate its future value, you can present your findings to your lender for greater chances of being approved for this kind of loan. You don’t have to wait for permanent financing to come through - ask your lender about quick bridge loans today!

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