Commercial Bridge Loans are defined as a flexible loan arrangement designed to provide short-term financing until the borrower reaches a definite exit strategy that can be executed, such as a refinance or sale.
Commercial bridge loans act as interim funding, facilitating the purchase of commercial real estate and completion of rehabilitations or refurbishment, but not as permanent financing. A commercial bridge loan assists or provides financing to purchase a commercial property in need of significant renovations. They can also be used by borrowers not yet able to qualify for permanent financing.
Commercial bridge loans, popularly known as commercial mortgage bridge loans are short term commercial real estate loans that are used for buying commercial properties when permanent financing is not an option. Their primary use is when a property needs significant renovations done to it before it will be qualified for permanent financing.
A borrower would most likely consider filing for a bridge loan if the property has unsatisfactory occupancy rates or the borrower’s credit profile needs improvement or has a bad history. These reasons can extend when the borrower refuses to wait for permanent financing or with an incomplete ownership / project team in place.
Bridge loans have repayment terms of between 6 months to 3 years period, after which the property is either sold or refinanced through permanent financing.
Commercial bridge loans are ideally used for the purchase or refinance of corporate buildings, hotels and casinos, retail properties, multifamily housing including apartment complexes, and even for raw lot that will be industrialized for commercial purposes.
These bridge loans consist of quick closings and the loan amounts are computed depending on the fully improved value of the property, rather than its “as-is” value.
In this way, commercial mortgage bridge loans provide the capital that a real estate investor needs in order to capture opportunities immediately, complete necessary renovations or refurbishments, and either market or refinance into permanent financing with affordable monthly payments.
Commercial bridge loans can be a vital tool for those looking for investment real estate such as commercial, residential, or industrial, or for businesses looking for space to function or operate out of.
The most common purpose of a commercial mortgage bridge loan is for the purchase and rehabilitation or development of an underutilized commercial property. They enable borrowers to purchase a property that’s in mediocre to poor condition and execute needed renovations and upgrades.
Celine Trinidad is a writer who writes about everything under the sun, including finances, real estate, and banking.