When to Seek a Commercial Bridge Loan (Speed & Creativity)

[Alex Roter]

CRE bridge loans are tailored to owners and investors who require speed, creativity and certainty of execution.

Here are a few scenarios where a bridge loan would be a great solution:

1. Time-Sensitive Closings

2. Discounted Note Payoffs

3. Partner Buyouts

4. Credit-Impaired Borrowers

5. Limited Environmental Issues

6. Value-Add / Transitional

7. Non-Stabilized Properties

8. Acquisitions / Refinances

9. Investor / Owner-Occupied

Time-Sensitive Closings: Bridge loans can close as quick as 2 weeks, while conventional, permanent loans can take up to 2 months on average. SBA loans are taking up to 5 months to close.

Discounted Note Payoffs: If a borrower is in default with their current lender, and the current lender has agreed to settle with less than what's owed, a bridge loan is easier to qualify for, especially if there are any mortgage lates. Bridge lenders are typically okay with mortgage lates. 

Partner Buyouts: Small business owners may not have the capital on hand to buy a partner out right away, which can drag out the process and have unintended consequences for the wellbeing of the business. Bridge loans can provide external financing to complete their partner buyouts quickly, preserve professional relationships, and ensure that the health of the business isn't affected by an extended transition period.

Credit-Impaired Borrowers: Typically, permanent lenders required a minimum 680-720 mid FICO score. Bridge lenders may not have minimum FICO score requirements.

Limited Environmental Issues: Any environmental issues will make it difficult to qualify for permanent financing. Bridge lenders are more forgiving and can provide the property owner with the capital needed to restore their property environmental conditions. 

Value-Add / Transitional: Bridge lenders can provide additional capital to use towards improvements. Loan calculations can be based on After-Repair-Value, not just as-is value. Also great for properties that need to be converted from one purpose to another. Also, minimal prepayment penalties allow for maneuverability.

Non-Stabilized Properties: When a property is non-stabilized, it has some type of vacancy which can be the result of poor marketing, deferred maintenance, or improvements that need to be made to make the space desirable for a tenant. When a property is non-stabilized (occupancy less than 80%) it will have difficulties qualifying for a permanent loan. 

Acquisitions / Refinance: Bridge loans can be used to purchase properties and refinance (rate & term or cash-out)

Investor / Owner-Occupied: Available for either