As the phrase implies, a commercial bridge loan is a short term financing solution, offset against commercial real estate, which bridges any financial gaps that are standing in the way of securing a profitable deal. This kind of commercial funding enables you to overcome any liquidity limitations, and take advantage of time sensitive business opportunities in a reasonably efficient and timely fashion. A commercial bridge loan allows you to acquire temporary cash that bridges liquidity shortfalls, so that your company can carry out some type of interim activity. For instance, if one of your existing loans has a balloon payment due on it, you could settle that repayment until you acquire permanent financing.
Alternatively, if there is a restricted time span during which some commercial real estate will be available, you might utilize bridge loans to buy that asset, and then repay your bridge loan using some of the permanent financing proceeds. Thus, essentially, a FundingDatabase.com commercial bridge loan is temporary funding, which you can utilize until you refinance, sell, complete, or make improvements on your property. Most of the time, in order to make up for their temporary nature and increased risk, bridge loans have bigger interest rates than standard loans.
Generally, a commercial bridge loan has terms that range from six to twelve months. Many commercial lenders permit borrowers to extend their bridge financing for an extra six to twelve months, for an extra charge. Typically, this charge ranges from half a point to two points, although this can vary. Normally, this type of financing gets repaid whenever the borrower arranges permanent financing upon the associated property, once the actual improvements have been completed and the new tenants have moved in. Invariably, due to their temporary nature, commercial bridge loans will not stipulate any penalties with regards to prepayment.