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BUYER'S GUIDE

Understanding Bridge Loans / Bridging Finance - Benefits of Getting a Bridge Loan

For those business owners in need of commercial or investment property, understanding bridge loans can mean the difference between success and failure. The ability to move fast has never been more important than it is today, and bridging finance can provide the flexibility that is needed in the world of commercial real estate.

In order to understand the benefits of getting a bridge loan it is important to understand exactly what a bridge loan really is. A commercial bridge loan is sometimes also referred to as a hard money loan, and it is a short-term loan that is used while the business person is securing permanent financing. In essence understanding bridge loans means understanding that these loans are meant to bridge the gap between the buyer’s need for immediate cash to close the deal and a long term financing package for the property in question.

The terms of bridging finance will vary of course, but in general bridging finance is offered in terms from 12 to 36 months. In many cases the bridging finance offered can later be refinanced into a longer term and lower cost permanent financing deal through the same lender.

One of the chief benefits of getting a bridge loan is the fact that these loans are designed to close quickly, making them the perfect vehicle when fast cash is needed to close a business deal or buy a piece of commercial property. This fast closing allows buyers of commercial properties to take advantage of deals quickly, on their terms. Bridge loans are also used by companies and individuals to restructure debt and avoid a bankruptcy filing.

Although bridging finance is sometimes used by home buyers to bridge the gap between the purchase and sale of a home, this type of financing is most frequently used in the purchase and refinance of commercial real estate and other commercial properties. There are commercial bridge loans being written for a wide variety of commercial properties, including industrial buildings, factories, apartment buildings, hotels, retail operations and mixed use commercial facilities.

While the benefits of getting a bridge loan can be great, as with any financial decision it is important to thoroughly research the proposal and to carefully compare various offers in order to get the best deal. There are many commercial lenders who specialize in bridging finance, and it is always a good idea to get several offers in hand before making a final decision.

Those needing a more thorough understanding of bridge loans should also be aware that the interest rates on these loans tend to be higher than the interest rates on similar long term financing. Due to their short term nature the costs of this bridging finance can be quite high, and it is important for the commercial real estate buyer to arrange for permanent financing as quickly as possible in order to keep those costs to a minimum. In many cases that permanent financing can be arranged with the same lender who provided the bridging finance, and the bridge loan can often be refinanced into a permanent financing deal as circumstances warrant. Bridging finance is not always the right choice, but in many cases bridging finance is the perfect vehicle for making the best deal.


Click here if you are looking for hotel financing, motel financing, financing for commercial real estate, business purchase, franchise opportunity, or if you need a business loan for equipment or working capital.

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