Bridge loans are a type of commercial loan with short term options averaging about a year or less and have high interest rates. These types of loans are to provide funds for refinancing, improving, or leasing a commercial property or while waiting for approval for longer term financing. For quick access to cash flow, bridge loans are a helpful way to meet your financial obligations on a short-term basis.
If you would like to discuss bridge loans options with a qualified broker, the team at POM (Peace of Mind) Capital & Funding Services knows the strict regulations and requirements to help you smoothly secure funding for your business endeavor.
How A Bridge Loan Works
Bridge loans are intended to bridge the gap while waiting for approval for more permanent financing and are not meant to be long term investments. Bridge loans can be used to cover various expenses involving your business, such as payroll, rent, utilities, inventory costs, and other recurring expenses. A typical bridge loan is:
- Is for up to one year
- Intended for real estate purchases
- Have high interest rates
- Requires collateral
Bridge loans are to provide immediate cash flow to fulfill any pressing financial obligations while the borrower secures a permanent financing option. For an individual, a bridge loan can be used to purchase a new home while their current residence is still on the market. In this instance, you will need to provide proof to your lender you can make the monthly payments in addition to your current financial obligations.
To qualify for a bridge loan, you must have excellent credit. Even so, a lender may only approve up to 80% the total value of your properties. Having a lot of money in savings and significant home equity on your current property are essential to afford the additional loan. The application process is typically a quick process, though they can carry large origination fees. Because bridge loans are intended to bridge the gap between long term financing, most do not have repayment penalties. When permanent financing is secured, most borrowers immediately pay off their bridge loan, incorporating the debt into their new loan which usually has significantly lower interest rates.
The need for quick financing can seem daunting for applicants, especially those new to bridge loans. Working with a qualified broker will help your application process go smoothly.
At the POM Capital & Funding Services, we can schedule a consultation to learn more about your options and what to expect when securing a bridge loan. Coming prepared with the right financial documents and project expectations will help your broker become familiar with your circumstances to get you the best loan possible.
POM Capital & Funding Services is a leading provider of alternative funding solutions for businesses of all types and sizes, offering commercial finance solutions and products to businesses in the Centerport, New York area and throughout the state of New York.