Sometimes, it takes longer than one might like to get approved for a traditional loan from a bank or other lending institution. During the gap of time when you discover an investment opportunity and when you finally get approval for the cash you need, and during this period there are many potential ventures that slip through the cracks. This is why more and more investors have been turning to bridge loans to secure the properties they want.
What are They?
When you choose to take out bridge loans, you’re electing to partake in a short-term loan that’s aimed at covering this gap in time. Typically, you’ll use the loan to pay for the commercial property or other investment, and you’ll pay this loan back when you receive your traditional financial support. These loans can typically last from a few months to a few years, but the most common stretch of time is a single year. By this point in time, most businesses will have found more permanent means of support.
Because the terms are typically so short, there are a few key uses which business owners take them out for. The most common uses are protecting a business or property from foreclosure, securing a property when opportunities have slim windows for action. There are, of course, other uses that these loans can be used for, but those mentioned are by far the most common.
What are Some of the Benefits?
There are quite a few benefits to bridge loans that can be easily overlooked if you’ve never taken one out before. By nature, they’re perfect for pulling a business or property out of financial hot water, and repayment terms are usually simple once a property’s been sold or more permanent financial solutions have become available. These loans are typically offered by private lenders who use their best judgement on various scenarios instead of relying on credit reports and other financial details. This makes them the perfect solution for those who have limited experience with commercial property investment and limited funds but who are looking to get involved in this market anyways.
Investors use bridge loans for commercial properties because they are by far some of the simplest temporary financial solutions out there, and are designed to meet the needs of investors of all shapes, sizes and experiences. Speak to a professional before making a commitment to this type of loan in order to ensure that it’s the right move for your business’s finances.