What is a bridge loan?
- A bridge loan creates a bridge between a project that requires funds and the necessary financing.
- Bridge financing is temporary.
- Obtaining a bridge loan allows the loan to close quickly; therefore you can create the time you need to secure permanent financing solutions.
- These interim loans often have short term higher interest rates. The borrower understands this is the cost of interim funding.
Reasons for Bridge Financing:
- Need for immediate closing due to seller demands.
- Lender Dropout! The lender stops the process during underwriting, putting the entire loan in jeopardy.
- Quick closing requirements, as buyer wants to use 1031 funds.
- Buyer demand: Our clients just have to have this property and it is has to close now! Sometimes our clients will see an underperforming property that has just come on the market. Or they have had their eye on a competing business and knew they wanted to purchase it if it were for sale. These buyers are seriously motivated!
- Competitive bidding: sellers will often entertain multiple bids from multiple buyers. Being able to close quickly may seal the deal.
- Our clients may want to use SBA (Small Business Association) guaranteed loans or HUD (Housing and Urban Development) loans or Department of Agriculture loans (for rural properties). These government backed loans take a little longer to close. Clients who use bridge lending can close quickly and then refinance the loan through these agencies.
- Businesses that need to stabilize. We have many clients who are very talented owners and managers. But new businesses can be risky and lenders can be risk-averse. If borrowers take possession of a business, turn it around and stabilize it, their business can be more attractive to lenders in the near future.
Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. Whether you are looking to refinance or purchase, we would love to discuss your business plans with you. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.
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