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