Many investors and commercial real estate property owners never think of a commercial bridge loan as an alternative to their borrowing needs. This is due to 1) they don’t even know they exist or 2) They think these commercial bridge loans, aka hard money loans are just too expensive. Since those visiting this site will obviously know of the existence of these commercial property bridge loans, let me address the second item, that they are just too expensive.
There are two areas I want to cover to address the cost of commercial bridge financing. First is if you have the time, credit, business history to get a conventional commercial real estate loan or an SBA loan and you qualify then by all means go for it. Oh, did I mention patience, particularly for SBA loans as they can take months. In my experience, time is the biggest issue for prospective commercial real estate borrowers. After all, in today’s fast paced world where competition is fierce in virtually every industry, speed can mean the difference in winning or losing. Having said all this, let me cover just some (there are many, almost as many as there are borrowers) of the scenarios where commercial bridge loans make perfect sense.
- Less than perfect credit – In todays’ divorce proned relationship world, perfect credit is becoming more and more rare. Throw on top of that the “guilty till proven innocent” approach of the three credit bureaus and you have a recipe for less than great credit scores. Oh, and let’s not forget the aggressiveness of lenders, particularly credit card companies in their collection tactics. Bottom line is it’s almost a full time job to monitor and manage one’s credit to be sure you are in the top tier.
- 2 or more years in business – Investors just starting out won’t clear this hurdle as well as those in business a bit longer if their earnings results in the first year or two weren’t good. Whose is? This is true not just for SBA loans but for conventional commercial real estate loans no matter how good your last year’s earnings were or the fact that you’ve “turned the corner” in your young business.
- Low occupancy for multifamily, retail and office condos – This issue can hit almost any commercial property owner from the new investor wanting to rehab some apartments with poor management history to a current owner that lost a couple of important (square foot wise) tenants.
- Less than 51% owner occupied – This is an SBA requirement that many fail to meet. You’d be surprised how many owner occupied properties renting out part of the building fall just short of this arbitrary percentage.
- Insufficient seasoning of down payment funds – Let’s say you received some money from a relative and want to use it as a down payment on a commercial property so you meet their down payment requirements. Unfortunately, most conventional lenders want to see that money sitting in your account for 6 months. Crazy, I know but that’s the world of traditional commercial lending.
- Buying an unstabalized rental property – Even rental property whether it’s an apartment complex, assisted living facility, strip mall, commercial condos, etc. most traditional lenders want to see lots of stability. Sadly that’s the very thing that created the opportunity for many investors to pick up the property for a good price, hence a great investment opportunity.
Commercial Bridge Loans
Need I go on? The bottom line is commercial bridge loans ‘bridge the gap’ for commercial property owners and investors until they qualify for a lower cost longer term commercial loan. So don’t discount the idea of a commercial bridge loan for your loan scenario. Bottom line is this. If the numbers make good economic sense, go for it and don’t look back. Ultimately, your pocket book will thank you.
Call Us @ 1-877-655-5625 or 1-828-689-4683 for Hard Money Loans With A Bankruptcy.
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