Two Demerits of Commercial Bridge Loans
With huge starting capital, most businesses and any commercial activity start after acquiring a loan to purchase necessary assets. However, with stringent and lengthy processes involved in getting a loan from relevant institutions, you are likely to fall behind schedule. What is the convenient option available to sort you out? Such question is likely to pop up in the mind of the young investor running on strict deadline with a schedule to accomplish.
Take a deep breath and relax because commercial bridge loans are there to help people like you. These are short term loan options providing a temporary financing option until you secure a more permanent financing option. The bridge loans frequently fund the renovations or purchasing of the real estate properties. Your plans don’t have to stall because you are waiting your long term intended financier. Keep the wheels rolling as you await the intended one to chip in and start realizing your profits even before the full swing. Such initiative is beneficial but has some drawbacks that you must consider when you take the commercial bridge loans. They include;
Large payments; the short-term lending period means it requires a quick repayment. With the interests factored in, the amount is more enormous. This can prove difficult especially to whose businesses have not picked up and can’t make the payment at once. The short repayment window makes it less flexible to late repayments and will automatically attract substantial fees and penalties. The increasing penalties will shift your focus from the business and channel your energies to clearing the loans instead. However, it can be avoided if you get the long term financing option you were waiting. This has to come before you begin defaulting the bridge loan and gather the additional default interests.
There is no guarantee that the facility you set up using the commercial bridge loans will sustain and pay back in time. If the project fails, the total funding goes up in flames and forces you as the borrower to seek other options to offset your loan. You are likely to be compelled to compensate using your money from other sources. The fear of bridge loan interests will force you to seek another loan to avoid the additional penalties. The accruing loan debts will automatically lower the credit rating making it harder for more financing in the future. To be safe, consider all the potential risks likely to be encountered and have a backup plan to bounce back in the case of any.
Given below is information on what to know about commercial bridge loans. There are people who refer to the bridge loans as swing loans but both terms typically refer to a kind of short-term loan that goes for a term of between one week to three years and it is usually taken to serve
an immediate need as the borrower awaits the closing of the deal on a more permanent form of financing. It is normally taken as an interim form of financing. Most of the time, the money once obtained from the more permanent form of financing is used to pay out the bridge loan and to take care of other capitalization needs.
Typically, the bridge loan will cost you much more than the conventional loans. This is simply because they come with higher hidden costs, points and interest rates and the fact that all these are amortized within a very short period. Adding to the fact that these loans come with an additional risk, the lender usually has to work with a lower loan to value ratio or to request for cross-collateralization.
The good thing about these loans is that the process of processing them is much faster and much shorter. Normally an interest of between 12% and 15% will be charged on these loans and between 2 and 4 points. The loan to value ration usually reaches a maximum of 70% for all the commercial properties and 80% for the residential properties. The loan to value ratio is usually based on the appraised value of the property.
It is possible to get either an open or closed bridge loan. An open bridge loan is one that comes with no specific pay off date while the close one comes with a specific pay off date. It is however imperative to note that it is possible for an open bridge loan to come with the requirement to make a certain payoff after an agreed time period.
It is very rare to get banks that will provide you with bridge loans. This is because commercial bridge loans usually come with very minimal documentation, are very risky and hold a very speculative nature. This is the reason as to why most bridge loans are given by businesses, investment pools and individuals who get to enjoy imposing higher interest rates on the borrowers.
The above information on what to know about commercial bridge loans is what you need to be armed with when you begin to consider the option of taking out a bridge loan.
Funny thing is that most people take that hard money loans and bridge loans to be the same thing. This is not the case; there is a very basic difference between these two. Not all bridge loans are hard money loans. Many investors make use of hard money loans for a wide number of things including bridge financing. The confusion mainly arises from the fact that the current bridge financing market is quite unhealthy which leads to a large number of investors opting to use hard money for their temporary financing needs.
Investors opt to use hard money bridge loans to satisfy their capital needs. For instance, you can want to buy a house and you stumble upon a greatly discounted house that is being foreclosed. You see that the deal is too good and you do not want to let it go. You want to buy the house so that you can rent it out but its condition is very bad and it needs a lot of renovation before you can be able to put it out in the market. No lender will be willing to advance you a long term loan to renovate the property due to the bad condition. A bridge loan will suffice at this point. In simple terms, a bridge loan helps you to survive between the time when you buy the house and when you will be able to get permanent financing to pay for the house. Investors used to approach banks to get bridge financing. However with the hard hit that the economy has been recently getting, many banks have opted to stop giving this type of financing and those that still do have put in place very tight limits.
With hard money loans on the hand, the money is sourced from private investors. The loans come with interest rates and origination fees that are a bit over the prevailing market rate. These rates though still lie between reasonable limits. Normally investors turn to them because they know that they can get this money quickly without having to go through a lot of scrutiny and they can pay it off quickly. The process that the private lenders will take the borrower through is much shorter and much faster compared to the one that the banks will take you through. This makes it easier for the investors to acquire the cash that they need for the current financing needs that they have. This is what has given rise to the hard money bridge loans.
How to get a commercial mortgage refi even with a poor credit score.
Countless times you have sat down on your favorite chair and thought about buying a new house. Your wife keeps complaining how the kitchen cabinets won’t fit all her cutlery that she wants, the oven is too small because she wants to bake. The next few words will tell you how to overcome this state.
Have a history. For most people with poor credit, you most probably made one deal that wrecked your financial flow or invested your money in the wrong pot. To get a commercial mortgage refi with poor credit, first and foremost you need a solid background. If you fall under this category, getting a financial donor to listen to your claim will help you move from where you are. In instances like this, the one thing you always need to remember is always state the truth on why something did not work out. For the bank to grant you your request, then you need to convince them, that you did not squander your money, it’s just that you had not insured your business which went down in a fire from the next store. All the financer needs is to trust you with their money with no reasonable doubt.
Commercial mortgage refi with poor credit is nightmare for everyone but you can always wake up on the right side of the bed. Sit down and look at where you flawed, create a list of what you did and where you went wrong vertically parallel to each other and on the third row create a solutions column. This is where you are going to list what you could have done different. If you did not insure your property, insure it this time round, if you loaned your brother in promise of getting it back in interest, invest it this time round. Then take the most probable solution that you have worked out and approach the financer with it.
The third and final step is actually waking up from your old broken one sided chair and going for it. The one thing that kills enough people and families is individuals who taught themselves how sit squarely on that one legged chair and not tumble on it. This means that you got comfortable when you fell and you have no reason whatsoever to come back because you went back to your mother’s house of your wife has a well-paying job. Commercial mortgage refi with poor credit is never a good place to be but since you are there now, why not do something about it in the first place?
That is how you use a bad state to overcome another.
A bridge loan mortgage is a short term loan that a potential home vendee can apply for in the event that he lacks adequate money to purchase a new home, while awaiting the sale of his current home. This means that the buyer will temporarily enjoy the ownership of both homes before the old one is sold. The old home will serve as collateral and will contribute largely in the repayment of the loan for the new home. If you are thinking about taking a bridge loan mortgage, here are facts you will consider knowing:
The repayment period
The duration taken to repay such kind of a loan is usually shorter than the conventional time allowed by bank loans. Usually this period averages between six months and a maximum of three years, reason being that the loan is just a bridge to cross you over to a point in time. The lender sweetens the deal by minimizing the troubles of a prolonged loan application process or disbursement time but will as well limit the demand time.
The interest fees
It’s generally accepted that the interest rates for this kind of loan will be higher than the mainstream bank loans. The lenders normally allow a more flexible repayment pattern in terms of installments but the interest rates remain inflated. However, this barely discourages serious buyers considering how fast their desires are met by the loan. Furthermore, the old home when sold will cover a great part of the loan so that the eventual amount will not seem large.
The exit strategy
Having an established way of settling the loan gives one confidence of approaching the lender. Most lenders will demand to see your intended ways of covering the loan before they lend you. More often than not they will emphasize on scrutinizing your credit worthiness or collateral security. A previous history of a successful timely loan repayment is an advantage because it actually boosts your credibility. On the same line, having a back-up plan such as another asset that you can sell to settle the loan is of equal importance. Bridge loan mortgage have no pre-payment penalties unlike other hard loans.
Approach to the lender
Private lenders require objective persuasion to lend by proving your loan worthiness. Therefore the approach you make will play a part in your chances of acquiring the loan. You will find it valuable to present yourself with a language that portrays commitment, confidence and professionalism. Abiding by the first hand rules that are set will put you at a better position also. Other demands should be made later.
A commercial bridge loan has a lifeline of two weeks to three years depending on the lending facility. Most lending facilities will give you up to one year and only extend at a different rate upon agreement with the lender. As you apply for a bridge loan for commercial purposes, it is important to note that they come with a higher rate than the normal interest rates. It is also worth noting that this particular kind of loan is meant for property owners who need for one reason or another to improve an existing facility or make final touches to a new building. It gives you the chance to put your property in order as you wait for larger and better financing.
To effectively benefit from a commercial bridge loan, it is important to have a good credit record. A financial statement will also come handy if you need to have your application approved. A poor credit record is not a very good show for lenders as it might help in your loan not being approved. Interest rates depend on available collateral and this lender will be advised on making the loan application. It is our greatest desire and will to ensure that lenders get what they want in the shortest time possible.
The good thing with the loan process is that it is absolutely done online. You do not have to undergo the process of providing copies and photocopies of documents to be able to find approval. It gives us great pleasure to work with all customers. You do not have to be a large commercial holder to be approved. We serve all kinds of commercial owners who desire to have a loan as they wait for their other processes to complete. Our prices are fair and quite reasonable.
When looking for a commercial bridge loan wisdom would be to choose right. As lenders we work with our customers from the beginning in ensuring that they understand what they are getting into and how they are suppose to make repayments. Our staff will be will you all the way true.
Information on Hard Money Commercial Bridge Loans
Hard money commercial bridge loans are designed to offer businesses the financing they need until they are able to acquire long term financing. The US Funding Solutions offers hard money bridge loans which are available in different programs. They represent various private lenders. These lenders specialize in hard money lending for the purpose of acquisition of commercial property and refinancing. Properties offered loans include multi-family properties, mixed use properties, offices, warehouses, industrial properties, retail properties, hospitality and special use properties. These loans are the perfect solution to keep the business going before secure long term funding comes along.
The hard money commercial bridge loans through US Funding Solutions are offered up to $15 million with down payments that are as low as 15%. The loan term varies between one to five years and the loan to value ratio is up to about 75%. They offer the loans throughout the US thus are not limited to various regions.
The interest rates depend on the type of loan, the risk profile of the investment and the structure. They vary between 8% and 14%. The hard money bridge loan programs offer a payment method of either interest only or principal amortization and a DSCR minimum of 1.2. Early repayment is allowed but it is reviewed on a case to case basis and to be determined by the lenders.
Security needed is the first mortgage lien and additional collateral repayment is determined on a case to case basis after assessment of the circumstances. This makes it easy to be able to qualify for the loan as only the first mortgage lien is required. There are various deposits expenses to be made together with the initial deposit made in the first payments. These are the third party expense deposits for the acceptance of term sheet, the closing expense deposit for the acceptance of closing letter and the unused expense deposits which is refundable.
There are no charges for the initial underwriting thereby reducing the overall charges for the one taking the loan. The US Funding Solutions is a reliable source of hard money bridge loans. The qualifications vary depending on the specifications given by the private lenders. The loans are secured in real estate and the lenders use the equity in real estate for their business. The private lenders are a good option for a business stuck without finance as they get an opportunity to continue with business.
There has been a lot going on in the credit market. People because of one reason or another are unable to meet their daily needs forcing them to seek commercial bridge loans. Bridge lenders look for a few things and as a customer you should be ready to provide the required information i.e. if you intend to be served. The finance industry is growing and customers are now able to bridge their loans with maximum ease. Before we move any further it is important to give a simple explanation what bridge loans really are.
As their name suggests ‘bridge loans’ are in fact a financial bridge until your next financial transaction. They are not limiting and can be used in any sector from mortgage financing to pay hospital bills. They have an endless list and lenders will understand your need before being approve the loans. This is to help us as a company matches you to the right loan facility. Bridging loans take only about 72 hours to be approved and should not cause any hassles if your paperwork is in order. This will also give us a chance to know what to base the loan on.
If your financial breakthrough is taking longer than anticipated, simply apply for commercial bridge loans. The loan period differs from institution to institution but it can go as 24 months. One thing you need to realize is that bridge loans come with a hefty interest and if you are in a financial crisis. You must be ready to pay. This in essence is your stepping stone to a long finance as in most cases. But this has been occasioned by the fact that they also have a higher default rate which a lender must be ready to meet.
Commercial bridge loans come up to about $25,000,000. So if you need such kind of a loan you must be ready to put it to good use and be ready to make repayments as agreed. Some companies will require you to pay a principal sum which in essence is refunded to you upon completion. If you have a burning financial need, do not seek the services of friends simply go to a money lending facility that will ensure that your account is credited in 72 hours. It will remain a secret and nobody will be able to know your source of financial increase.