The Basics of the Bridge Loan for Small Business Owners

You may not have heard a lot about commercial bridge loans as financing options, so the present article should be helpful in that regard. Essentially, a bridge loan is a commercial property loan in which you as a real estate investor, receive a loan to help you buy a property or pay for some pressing expense, while waiting for the newly purchased commercial property to yield funds from tenant payments.

The lender has the surety of receiving repayment when your first property is sold, or when you begin receiving payments from your new commercial property, and in the meantime you get the funding you need to carry out a time-sensitive transaction. The ‘bridge’ in this context refers to receiving cash that bridges you into a position where you can buy a new property, before you actually have cash in hand from tenants of that new property.

Uses for bridge loan funds

There is actually a wide variety of uses that bridge loan funds can be put to use for, and many of these come into play in commercial real estate transactions. In some cases, balloon payments are about to fall due on a commercial loan you already have in effect, and the bridge loan could be used to manage that payment until more permanent financing becomes available. It also happens fairly often that you have to act quickly on a piece of commercial property which is available, before someone else beats you to it. Once money starts coming in from your commercial property, you can use it to repay the bridge loan.

Temporary loans and higher rates

Due to the temporary nature of bridge loans, there are almost always higher interest rates attached to them. This is partly because a lender needs to recoup some profit from the short-duration loan, and partly because there is an increased risk of default, if permanent financing does not fall into place for the borrower.

Bridge loans from FinCentral Capital

If your company is in need of a bridge loan, we at FinCentral Capital will be glad to explore ways with you to make that happen. Contact FinCentral Capital at your earliest convenience to consider financing options for the bridge loan you need.

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