When Should You Use a Bridge Loan for Commercial Property Transactions?
Any experienced real estate professional knows how important it is to select the right type of financing to ensure their business gets started on a good note. Veteran investors often can pay for the transactions with cash; however, newer entrepreneurs need financial assistance in the form a reliable loan. One of the most popular types of loans for commercial properties are bridge loans. This isn’t always the most viable choice if you’re purchasing new commercial property, but there are definitely times when this is your best bet.
If cash flow for loan funding is a concern or a barrier to obtaining the money you need, bridge loans make sense. The type of loan can give you access to the cash you need quickly. These loans are an excellent way to give you some leeway until other funding is available. Often, bridge loans have extremely short terms of as little as two weeks. This loan is not ordinarily intended to be a long-term option but is considered interim financing.
Money is Around the Corner
Bridge loans make sense to the investor who is in a pinch for cash but is certain more money isn’t far behind. The loan bridges the gap between selling your currently property and the purchase of a new one.
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In the world of commercial real estate, if you have your eye on a bigger property that you think makes sense for your growing business, you don’t want to pass up on a good deal. The next investor could jump right on the property if you aren’t able to secure it. However, if you haven’t sold your current property and aren’t able to own both, what can you do? Bridge loans can come to the rescue and allow you to purchase the new property before selling the current one.
You Don’t Mind Taking Risks
There’s no question that this type of loan carries with it a higher degree of risk than a traditional loan. Rates are higher, and the short term can put you in a difficult place if you’re having a hard time selling a current property. There may also be prepayment penalties. Before selecting this loan, do some careful research and make sure it’s right for you. If you’re confident you can tolerate the risk, there shouldn’t be any reason to pass on this loan.
Your business may thrive with a bridge loans. Consider using this forms of financing for your next commercial purchase