Bridge loans. You’ve heard about them, you kind of understand what they are, but you’re not clear on the details or if one is right for you? This article will hopefully clear up some of the ambiguity surrounding Commercial Real Estate (“CRE”) bridge loans and answer any unanswered questions.
What is a commercial real estate bridge loan?
A commercial real estate bridge loan typically has a 1-5 year term and is intended to transition an underperforming property into one that has reached full potential. This is achieved through a multiple-advance loan structure that commits money up front to cover the cost of the purchase or refinance, and then future monies for leasing costs and capital expenditures needed to maximize the income generated by the property. That unique structure is what makes a bridge loan.
Would a bridge loan be right for your deal?
You find yourself involved, or at least interested, in purchasing or refinancing commercial property. You’ve made the decision to finance a portion of the investment with debt, and you require a loan, but you don’t need the loan for a long period of time. A bridge loan could be the solution.
Bridge loans have a special place in the commercial real estate finance ecosystem. They exist, as the name suggests, to bridge your investment over a transitional period. There are many reasons commercial real estate borrowers or sponsors look to a bridge loan for their financing needs. Some of them are: