When an investor has interest in a particular property but there happens to be a gap between when financing will become available and the closing date they do not have to pass up the opportunity. Instead, it is possible to secure a temporary form of financing called a "bridge loan". Anyone who is curious what is a commercial bridge loan will find the following information to be helpful.
Financial bridging is intended as a temporary measure that can be implemented for anywhere from two weeks to three years until the investor has more long-term arrangements in place, which will then be used to repay the bridge loan. The loan-to-value ratio is lower, amortization period shorter, and interest rate is higher but less documentation is needed to secure this type of financing.
The primary use of these types of loans is to allow commercial investors the quick purchase of properties of interest when time or circumstances do not allow for traditional methods of financing. Clients who apply for such financing are considered to be a higher risk, which accounts for the higher interest rates and costs.
Banks deal with lower risk applicants and require substantially more in the way of documentation before they will approve any borrowing. Those who are in search of bridge financing will normally turn to individual lenders, private companies, or investment pools.
The highest loan-to-value ratio an investor can expect to be give for commercial properties is 65 percent, according the the appraisal value. There are both closed loans that are only available for a certain period of time, and open loans which don't have a payment due date established initially. If an investor wishes to apply for subsequent loans, it is likely that the interest rate will be lower as the risk is considered to be less.
One example of where this type of borrowing serves its purpose is during the time when a developer needs to await the approval of a permit. If all goes as planned and the project goes ahead, the next level of financing will then be drawn on to cover the cost of the bridge loan. It can also be used as equity on properties currently owned which close after others which the investors wishes to purchase, the sale of the former paying off financing for the latter.
Businesses that are in the process of changing management on some level may also find it useful to obtain bridge financing to stay afloat while in search of new investors. It can also be used for the quick purchase of a discounted investment or auctioned-off property without all the red tape associated with traditional means.
Financial bridging is intended as a temporary measure that can be implemented for anywhere from two weeks to three years until the investor has more long-term arrangements in place, which will then be used to repay the bridge loan. The loan-to-value ratio is lower, amortization period shorter, and interest rate is higher but less documentation is needed to secure this type of financing.
The primary use of these types of loans is to allow commercial investors the quick purchase of properties of interest when time or circumstances do not allow for traditional methods of financing. Clients who apply for such financing are considered to be a higher risk, which accounts for the higher interest rates and costs.
Banks deal with lower risk applicants and require substantially more in the way of documentation before they will approve any borrowing. Those who are in search of bridge financing will normally turn to individual lenders, private companies, or investment pools.
The highest loan-to-value ratio an investor can expect to be give for commercial properties is 65 percent, according the the appraisal value. There are both closed loans that are only available for a certain period of time, and open loans which don't have a payment due date established initially. If an investor wishes to apply for subsequent loans, it is likely that the interest rate will be lower as the risk is considered to be less.
One example of where this type of borrowing serves its purpose is during the time when a developer needs to await the approval of a permit. If all goes as planned and the project goes ahead, the next level of financing will then be drawn on to cover the cost of the bridge loan. It can also be used as equity on properties currently owned which close after others which the investors wishes to purchase, the sale of the former paying off financing for the latter.
Businesses that are in the process of changing management on some level may also find it useful to obtain bridge financing to stay afloat while in search of new investors. It can also be used for the quick purchase of a discounted investment or auctioned-off property without all the red tape associated with traditional means.
About the Author:
Tom G. Honeycutt is a full-time real estate entrepreneur in Atlanta, GA. Tom helps readers by providing practical and useful knowledge to better understand lending choices. If you are looking Commercial Property Lender Loans | Atlanta, GA He suggests you check out the website iFund International.
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