Bridge Financing Takes the Lead in NYC Property Developments

With the recent influx of commercial real estate investment projects in New York City, the need for specialized financing solutions has come to the forefront. As the demand for specialized financing solutions intensifies, traditional lending avenues are taking a backseat to faster, more efficient, and accessible funding programs. At the heart of this dynamic shift, NYC property investors are turning to bridge financing to bridge the gap, cover immediate costs, and keep their projects on the path to success. In this blog, we’ll explore how bridge financing is leading the way in fueling the growth of property developments in New York.

What is Bridge Financing?

Bridge financing, also known as a bridge loan, swing loan, or bridging loan, is a short-term financing option used to bridge a temporary gap between two longer-term financial arrangements. It provides borrowers with immediate access to capital to meet short-term funding needs while they await the fulfillment of a more permanent financing solution or the completion of a specific event.

A traditional bridge loan is commonly used in real estate transactions to facilitate the purchase of a new property before the sale of an existing property is finalized. For example, a homeowner may use bridge financing to purchase a new home before selling their current home. Similarly, real estate investors may use bridge loans to acquire properties quickly or to fund renovation projects to refinance or sell the property at a later date.

Bridge loans are typically secured by collateral, such as real estate or other valuable assets, and they have shorter loan terms compared to traditional mortgage loans, usually ranging from a few months to one or two years. The interest rates and fees associated with bridge loans are often higher than those of traditional mortgage loans to compensate for the short-term nature and higher risk of the loan.

Parting Ways with Traditional Lending Channels

Traditional lending channels have become more of an obstacle than anything else for NYC commercial real estate investors. Banks and similar lenders still view commercial real estate as a high-risk investment, despite the growing demand for properties throughout New York City. Traditional lenders have a high point of entry, and interest rates that are subject or arbitrary hikes.

Obtaining a traditional loan also involves a lengthy and rigorous application process. Borrowers may encounter strict eligibility criteria, extensive documentation requirements, and time-consuming underwriting procedures. Traditional lenders may also have conservative lending standards, making it challenging for borrowers in NYC with a less-than-perfect credit score or unconventional financial situations to qualify for loans.

Furthermore, traditional lenders may have limited flexibility in terms of loan terms and repayment options, which can restrict borrowers’ ability to tailor the financing to their specific needs. Lastly, traditional lending may involve higher down payment requirements and longer loan approval times compared to private lending, potentially delaying real estate transactions and limiting opportunities for borrowers. Additionally, traditional lenders do not have programs tailored to the needs of NYC commercial real estate projects.

Bridge Financing Takes the Lead

Bridge financing is not just for standard businesses. Commercial real estate investors regularly use these types of loans to cover immediate expenses while larger loans are still in the pipeline. Permits, materials, lining up contractors, and more need to be paid for in advance to ensure commercial real estate projects stick to timelines so investors can start generating revenue quickly.

Bridge financing can also facilitate the refinancing of existing commercial mortgages or maturing loans. Borrowers may use bridge loans to bridge the gap between the maturity of an existing loan and securing long-term financing or to take advantage of favorable market conditions, such as lower interest rates or increased property value.

Bridge Financing is Versatile

Bridge financing can be used for more than just renovation and rehab projects. Bridge loans can also be used for debt refinancing and restructuring, repositioning assets, partner buyouts, and even DPO financing. Bridge loans can be arranged quickly so commercial real estate investors in New York City can remove obstacles and expedite projects instead of getting caught in the red tape of traditional lending channels. With more Opportunity Zones and the need for both business, industrial, and multifamily space throughout NYC, investors are using temporary loans instead of waiting on traditional lenders to approve loan applications. Express Capital Financing specializes in bridge financing for commercial real estate transactions and projects throughout NYC. Contact our offices today and get a jump start on your next real estate opportunity.