What is a Bridge Loan?

A bridge loan might be the right option if you need to finance a commercial real estate purchase or refinance an existing commercial real estate property.

How does a bridge loan work?

Bridge loans are short-term loans tied to the collateral offered by the loan recipient, often property or another business asset with determinable value. Bridge loans are purpose-built to help fund new investments in commercial real estate, offering short-term financing for these transactions. The loan amount will be a percentage of the asset’s value as determined by the lender.

This makes bridge loans a much faster form of financing than traditional loans. Loans based on collateral don’t require the same extensive approval process as traditional loans. For time-sensitive real estate and investment opportunities, bridge loans can be an ideal solution.

Most bridge loans offer a 6-24-month period before recipients must repay the loan. This makes them a great fit for periods of transition and new investments. While they are higher risk for lenders – and come with higher interest rates, as a result – they’re a perfect financing solution for businesses that need short-term, fast funding to support growth.

When should I pursue a bridge loan?

Bridge loans aren’t suitable for every business. They may be the right fit if you:

  • Need to refinance an existing commercial real estate property with an expedited loan process
  • Need a loan that can be approved and issued quickly – 10-20 business days if you’re working with Prescient Capital
  • Feel comfortable with relatively high-interest rates compared to other loans
  • Have a clear exit strategy identifying a path to refinance the loan at the end of the 6-24-month term

If you’re interested in requesting a short-term bridge loan or want to discuss your options with one of our financial experts, contact us today.

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