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A commercial bridging loan, also known as a commercial hard money loan, is intended to give business owners the cash they need to keep their operations going until they can get their long-term financing worked out. This guide will help you understand everything about this type of loan, including how it works and why it might be right for your situation. If you own a business or are thinking about starting one soon, it’s important to be aware of all your financing options – this includes both short-term and long-term loans.
Why Get a Commercial Bridging Loan?
As companies grow, so do their needs. Commercial bridging loan allow businesses to buy new premises quickly, with minimal fuss. They’re ideal for both entrepreneurs buying at auction and established companies looking for a new home in a new location. Once you’ve secured your bridging loan from us, you can move into your new premises as soon as possible – leaving you free to focus on growing your business. And because we put every application through an approval process before giving our final quote, we only present deals that will succeed – meaning no unwelcome surprises.
The Process of Getting a Bridge Loan
A commercial bridge loan is a short-term loan used by businesses until they can secure long-term funding from lenders. The process of getting one of these loans can be quite involved. As a small business owner, it’s important that you clearly define your needs and understand what steps are required to secure financing successfully. Start by defining your long-term borrowing needs and then work backwards, creating a timeline for when each step in your financing process must be completed.
What Do I Need to Apply for a Bridge Loan?
A commercial bridge loan is a short-term loan that allows you to borrow money for an immediate need quickly. They are more commonly used in real estate, mainly when a buyer is ready and waiting with their own financing lined up. For example, if you’ve found a business that’s ready to sell but they want $20,000 out of pocket before signing on the dotted line, bridge loans can help with that. The lender essentially gives you cash immediately until your deal closes, so they will want some assurance (or collateral) that you’ll repay them when it does close and your other financing comes through.
The Pros and Cons of Bridge Loans
A bridge loan is a great option for growing businesses that are unable to wait several months or years before accessing financing; however, you should be aware of its pros and cons. Bridge loans have high-interest rates because they are unsecured, and you will have to pay them back quickly—in most cases, within six months. However, if your business isn’t profitable enough in six months, you won’t qualify for a long-term commercial loan anyway. Commercial bridge loans are not great if you need any kind of asset security; but there are solutions available in some situations. For example, let’s say that your credit score is too low for a traditional bank loan, but one of your assets is an apartment building with strong rent history.
Are There Different Types of Bridge Loans?
There are a few different types of bridge loans that are offered by commercial bridging loan lenders. Their difference depends on your needs and what you’re looking for in your bridge loan. A bridge loan could be a short-term or long-term solution, and some bridge loans can be interest only, meaning that you won’t have to pay back any principal until you sell or refinance your property after a set period of time. However, an interest-only commercial bridging loan may not be feasible if it means that you have insufficient income flow available each month during repayment. The type of commercial bridging loan will depend on whether it is secured against an asset such as real estate or if it is unsecured, with no asset collateralization required.
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