Bridge loans are interim financing most commonly used for commercial real estate purchases to quickly close on a property, retrieve real estate from foreclosure, or take advantage of a short-term opportunity while long-term financing is being secured. Bridge loans on a property are typically paid back when the property is sold, refinanced by a traditional lender, or there is a specific improvement or change on the property that allows a permanent or subsequent round of regular mortgage financing to occur. Bridge loans are also regularly used to cover timing issues, which arise from project phases requiring different cash needs and risk profiles, impacting the ability to secure funding.
A bridge loan is similar and overlaps with a hard money loan. Both are non-conventional loans obtained due to short-term or unusual circumstances. The difference is that hard money refers to the lending source, usually an individual, investment pool, or private company (that is not a bank) in the business of making high risk, high interest loans, whereas a bridge loan is a short-term loan that “bridges the gap” between longer term loans.
Example of a bridge loan scenario…
A bridge loan is obtained by a developer to carry a project while permit approval is sought. Because there is no guarantee the project will happen, the loan is at a high interest rate and from a specialized lending source that accepts this risk. Once the project is fully entitled, it will become eligible for loans from more conventional sources that are at lower-interest, for a longer term, and in a greater amount. At that point, a construction loan is obtained to take out the bridge loan and fund completion of the project.
Common property types suitable for bridge loans:
- Residential Investment (Non-Owner Occupied)
- Vacation Homes
- Mobile Home Parks
- Medical Facilities
- Entitled Urban Infill Land
Our general guidelines for bridge loans:
- The property is a suitable type to qualify for a bridge loan
- The property is located in the United States (includes Alaska & Hawaii)
- The property Loan to Value (LTV) ratio is up to 80%
- The loan amount is between $1 Million and $100 Million
- The loan term is between 1 and 7 years
Good candidates for bridge loans are:
- A borrower with demonstrated ability to complete prior projects
- A borrower who has credit score of 650+
- A property that does not require a Loan to Value (LTV) ratio over 80%
- A desired minimum loan amount of $1 Million
- No recent bankruptcies, foreclosures, or tax liens
Why Blackhawk is a preferred solution for bridge loan borrowers:
- The borrower makes interest only payments
- Loans are approved based on stated income and bank statements only
- There are no minimum FICO requirements
- We provide non-recourse, secured loans
- We offer pre-payment flexibility
If you are looking for a bridge loan broker to provide you great terms and match you with the best investors around and to close in a matter of weeks, then apply today!