| What is a "bridge loan?" Certainly, it | | | | . However, you must realize that a |
| is not a loan for buying a bridge. It | | | | bridge loan has serious risks. It is |
| gets its name from a frequently used | | | | still something that will need to make |
| type of financial strategy. Properly | | | | sense for your business. |
| used, it can be a decided help in | | | | If you feel taking on this type of loan |
| achieving financial goals. Improperly | | | | is the right thing to do, you will be |
| used, it can be a financial disaster. | | | | far better off going through a |
| By definition, a "bridge loan" is a | | | | specialist commercial lender. This |
| short-term loan used to purchase | | | | lending institution will shorten the |
| commercial property. This is something | | | | entire process. A lending specialist |
| that can come in very handy, depending | | | | will know the market and he/she can |
| on the particular situation. There are | | | | quickly make a judgment on the best loan |
| two main points that you need to | | | | for you, based on your particular |
| consider before you opt for a bridge | | | | circumstances. It would do you no good |
| loan. One is your needs and the other | | | | at all if you have worked out a bridge |
| is the state of the property market. | | | | loan package only to find out the loan |
| One of the major benefits of bridge | | | | underwriters have rejected the |
| loans is that it will allow you to | | | | application. |
| purchase a new property before you have | | | | Be sure to check that the loan can be |
| sold your existing one. You will need to | | | | converted into a conventional commercial |
| evaluate your current situation to | | | | finance package. You will also want to |
| determine if your needs justify taking | | | | check on the type of interest rate and |
| on this type of finance. Some major | | | | the costs you will entail if you do have |
| questions you must field in your | | | | to convert. |
| evaluation are: | | | | Most commercial lenders will be willing |
| Will you lose the new property if you | | | | to extend the terms of your bridging |
| can't offer a deposit? | | | | finance package. If you have a buyer and |
| Would you be eligible for a discount on | | | | you are waiting for the sale to close, |
| the purchase price if you can come up | | | | a bridge loan is much more flexible and |
| with the cash fast? | | | | accommodating than you might expect. |
| What are the existing market conditions | | | | Repaying your bridge loan at the end of |
| in regard to the sale of your existing | | | | the loan term more often than not |
| property? | | | | depends on your ability to sell your |
| Would it be possible to sell your | | | | existing property. If your property does |
| existing property in the time frame set | | | | not sell in the required time frame, you |
| out in your finance package? | | | | will be paying the existing loan on your |
| Most bridge loans typically run for one | | | | current property, your new property and |
| year and will need to be paid in full at | | | | the newly converted bridge loan as well. |
| the end of the term unless it is | | | | If you believe this may be a |
| possible to convert it into a commercial | | | | possibility, be sure to take a package |
| loan. Also, interest rates will be | | | | that can be converted to a commercial |
| higher on a bridging finance package. | | | | loan if the need arises. Otherwise, you |
| If you do not have an urgent need for | | | | may have to come up with the full loan |
| the new property and the market is slow, | | | | sum at the end of the finance term. As |
| it may not be in the best interest of | | | | I cited earlier, bridge loans can be a |
| your business to take on this type of | | | | decided help for your business, but |
| loan. On the other hand if the property | | | | there are risks. Let the borrower |
| market conditions are good, you can get | | | | beware ! |
| out from under a bridging loan quickly. | | | | |