There are a lot of different kinds of loans that you learn about when you work with real estate. Bridge loans are a type of loan that not everyone knows about, and you may wonder what exactly it is. Essentially, it is a loan for a commercial property that uses the real estate as collateral. It bridges gaps between selling off one property and buying your next one. This allows you to take advantage of deals on new investment property before time runs out, without having to rush to sell off something else in order to get the capital.  

Advantages of Bridge Loans

Because of their nature of bridging time gaps between purchases and sales, these loans are generally supposed to be short term financing plans that give you time to complete or sell another investment property. However, these loans have a greater risk level than more common types of loans. As a way to make up for this, they have higher interest rates than a permanent loan would. Therefore, it is in your best interest to pay off the loan as quickly as you can so that you can avoid paying a lot extra in interest. Bridge loans generally don’t have prepayment penalties, either.  

Finding the Right Lender

Finding the right lender for this type of loan is very important. Before the time comes where you may need to take out a bridge loan, think of some potential lenders that offer this type of financing, and compare your options ahead of time. This will help you find the better deals when you aren’t under a time constraint, which will prevent you rushing your decision and choosing a lender that may not have worked the greatest for your situation. Once you have a few lenders in mind, you can reach out to them and try to create a business relationship ahead of time. They can then look over your qualifications and tell you whether your business would be approved for a bridge loan through their company. All of this work ahead of time will help you be prepared for the future.  

Buying additional commercial properties is an important part of owning an investment business, but sometimes the funds aren’t all there when an opportunity arises. Getting bridge loans allows you to jump on a good offer, then pay the lender back once the revenue from your purchase starts coming in or when you sell off another property that you own. Consider this solution if you think that you will ever need a boost to expand your business. 

If you think a bridge loan is right for your business, speak with us at Source Commercial Funding by calling 202-499-4441 to learn more about your options.