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13th August 2018

Commercial Bridge Loans: What Are They and How Do They Work?


Do you need a good financing option for your business? Consider commercial bridge loans. These are short-term and flexible financing options. Here's how they work.

Commercial bridge loans are interim commercial property loans that help you bridge the gap between securing a property or funding a new project and getting approved for long-term financing. This type of loan is ideal for anyone struggling with liquidity woes or who is anxious to take advantage of a time-sensitive opportunity.

Still, there are some things you should know before applying for your next business loan. For example, why do you need the money? Are you looking for a quick cash infusion or have you found the perfect home for your next business venture?

Do you need a good financing option for your business? Consider commercial bridge loans. These are short-term and flexible financing options. Here's how they work.

What is a Commercial Bridge Loan?

A bridge loan is a short-term loan, one taken out for a period of as little as two weeks or up to three years. Bridge loans are considered temporary loans that work to bridge the gap between the price of the item you're trying to buy--like a house or a piece of property and the loan you've been approved for.

In other words, you're borrowing a down payment to lock down a deal. Most of the time, a commercial bridge loan has a term length between six months and a year.

Commercial bridge loans may be more expensive than mortgages or small business loans and are paid off when the borrower secures a more permanent source of funding for the property.

How Does a Commercial Bridge Loan Work?

As the same suggests, a bridge loan tides you over financially during the time that you purchase a property and when you secure long-term financing. Often, commercial bridge loans are collateralised. Meaning, you'll need to put up some other commercial property as collateral to secure the short-term funding.

When Should You Apply for a Commercial Bridge Loan?

At AdMainBridging, we provide bridge loans to a range of applicants for both personal and commercial reasons. However, there are some specific examples of when applying for a bridge loan just makes good business sense.

A Great Opportunity Presents Itself

Your company may want to snap up a new property before someone swoops in and takes from underneath you. You can use a bridge loan to gather the payment fast--instead of saving up long-term.

The benefit here is, you're able to access opportunities reserved for people with established wealth or multiple investors.

Your Credit Score Needs Some Help

Unfortunately, bad credit can limit your ability to receive long-term financing. A bridge loan might be an option if you're looking to act on a business opportunity. Plus, on-time payments can help boost your credit score so you can become eligible for long-term financing.

But buyer beware. Because commercial bridge loans are a short-term solution, you'll want to make sure that you're prepared for the higher interest rates and fast turnaround time. That said there typically aren't any prepayment penalties associated with bridge loans.

You Need to Rehab a Property

A commercial bridge loan is also a good choice for people who want to update an older property. If you inherit an older rundown property or have one you want to update, you may be able to qualify for a bridge loan to remodel the property so it can command rents comparable to those in buildings nearby. The bridge loan finances the project and you'll pay it back when you secure long-term financing on the rehabbed property.

Additionally, things like condo conversions make good use of the bridge loan. This is a case where rents will be higher after the transition is complete, and as such, you'll be able to quickly pay back the loan.

You're Moving Your Business

You might want to take out a commercial bridge loan when you change locations. Or if you want to expand into a food truck, a storefront, or some other secondary location.

Commercial bridge loans and their short-terms are perfect for capitalising on that next thing. Borrowers can use the loan to acquire a new space and start setting up shop. Once things stabilise and you're able to get a more permanent loan, you can start paying back the temporary loan.

Where to Get a Commercial Bridge Loan?

You can get a commercial bridge loan from a variety of lenders. Banks, credit unions, and peer-to-peer platforms offer this type of loan. In some cases, you may run into a number of bridge loan lenders that offer loans to people rehabbing properties and flipping them.

Bridge loans are a useful means of financing projects that require a lot of capital up front, making commercial development available to a wider range of entrepreneurs.

Still, you should do plenty of research before signing up for a commercial bridge loan. Make sure that the interest rates and terms will work for you and that it's realistic to pay the loan back in a short amount of time.

In sum, commercial bridge loans open up a wider range of possibilities. Commercial real estate players know that taking advantage of opportunity means gathering funds and bridge loans help fill the gap between locking down a mortgage and scrambling to make the down payment.

Contact AdMainBridging Today to Get Started

At AdMainBridging, we provide loans on short to medium terms for a range of needs--whether you're developing luxury apartments or just trying to get ahead of the competition and purchase a property.

As a group of independent private lenders, we offer an edge against traditional banks. There are no credit checks, no lock-in charges, and interest rates start at 0.48%.

We know that a bridging loan is essential for quick-action financing. Contact us today at 0845 475 1814 or enquire online to get started on your next great venture.