What Are Commercial Bridge Loans?
Commercial Bridge Loans (also known as commercial mortgage bridge loans) are short-term commercial real estate loans that are used for the purchase or refinance of a commercial property when permanent financing is not an option. The typical use of a bridge loan is when a property needs significant renovation before it will qualify for permanent financing. However, there are other reasons a borrower might want to consider a bridge loan:
The property has unsatisfactory occupancy rates,
The borrower's credit profile needs improvement
The borrower can't wait for permanent financing i.e. they need a fast closing to acquire a property or to prevent foreclosure.
Bridge loans typically have repayment terms of between 6 months to 3 years, after which the property is either sold or refinanced with more permanent financing.
Commercial bridge loans can be used for the purchase or refinance of office buildings, hotels, retail property, multi-family housing, industrial buildings and even raw land that will be developed for commercial purposes.
They feature quick closings and the loan amounts are based 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 close on opportunities quickly, complete necessary renovations (if needed), and either sell or refinance into permanent financing with more affordable payments allowing for better cash flow.