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What is a Bridge Loan?

Bridge loans are a unique option for those that need a quick source of capital until they can find a more long-term financing solution. While bridge loans are most widely known for their use in real estate, this type of loan is also used for buying out partners, moving business locations, or even to boost a business’s credit score. Typically, bridge loans are required to be paid back anywhere from a few months up to one year.

Who needs a bridge loan?

As we mentioned, bridge loans are often used by business owners to tide them over while they figure out other financing options better for their future. However, bridge loans are also used by investors or buyers in order purchase property fast without getting caught up in the long approval process of traditional lending. Additionally, you can find developers using this type of loan to continue their timeline of building while waiting on others to close on their properties.

Why don’t more people use bridge loans?

Bridge loans can be a great asset when businesses are in a jam and need financing fast – but they do come with some negatives. Interest rates are expected to be higher than those of traditional loans as the length of the loan is much, much shorter. You will be expected to pay any closing costs when purchasing a property along with origination fees on the loan.

How can you qualify for a bridge loan?

As with any loan, banks will look at your credit score and past payment history, along with the collateral being offered. For investors or businesses looking to acquire property, the building or property itself will often be seen as the collateral in the loan. Most bridge loans cover around 75% of the value of a property.

Where should you look for a bridge loan?

Bridge loans are offered by a multitude of lenders. Most often, banks are able to provide the best terms and rates and will probably be able to also help you find long term financing as well. However, there are also bridge loan options through the SBA and many online brokers.

In the business world, we understand how fast opportunities can fly by. Utilize a bridge loan to ensure you don’t miss out on an important chance for your business to expand and profit! We’re here to help determine whether a bridge loan is the right fit for your business. Give us a call today for a consultation about your needs!

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