Why Commercial Real Estate Investors Use Bridge Loans
Many types of loans are out there, and in order to get the best one for your needs, it is helpful to learn a little bit about each one. For example, bridge loans come in handy for a variety of purchases, especially when it comes to commercial real estate. The reason is that when it comes to acquiring property, there will likely be other investors waiting to make offers. In order to entice the seller to give the building to you, you will likely need to put up some money upfront. This often necessitates a quick turnaround time, and a bridge loan can help provide you with the funds necessary to make an offer quickly.
These loans are great for when you need money right away. You can generally get approved within a matter of days, which is much better than a lot of alternatives. For other types of loans, you would likely need to submit a request to a financial institution. It might take a couple months to hear back whether or not you have been approved. By that time, the property you wanted to invest in could be long gone.
Bridge loans are also great for when circumstances exist that would otherwise disqualify you from other loans. As an example, say there is a piece of commercial property that is a bit of a fixer upper. The wiring or siding might be a little worn out, so there are some renovations that need to be taken care of. A bank may deny you a loan for this property because it is deemed as not commercially viable. You would need to fix any problems before getting approval. However, with these loans, you could still get money and put it toward fixing any issues.
Lastly, the application process for these loans is a lot more straightforward than others. For businesses, they generally just need to show that they have steady, reliable income. In the event you do not have steady income for your business yet, you might still be able to get a bridge loan by showing you have a business plan in place. This plan needs to be incredibly detailed in order to show a lender that you will be able to pay back the loan within the given amount of time.
Bridge loans are fantastic for a number of reasons, and there is no penalty for paying back your loan before the first due date. If you have the funds in place, then you can start paying it back immediately.