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					What is Bridging Finance?

Once you understand what the term, "Bridging Finance" means, it's easy to
understand how it got its name. The purpose of a bridging or bridge loan
is to provide short term cash for a real estate transaction until
permanent financing is secured. Bridge loans are commonly used to "bridge
the cash gap" when completing commercial real estate transactions.

Everyone knows it's difficult to time the sale of one property to
coincide with the purchase of another property. The slightest delay can
wreak havoc on the transactions and create obstacles that are difficult
to overcome. Having to pay two mortgages, whether for residential or
commercial purposes, for any length of time can spell financial disaster.
This is where bridging finance helps.

The goal of a bridge loan is to remove this financial obstacle so that a
commercial transaction can proceed. In the majority of situations,
"bridging finance" provides additional funding so a company can continue
to pay the lease on its existing commercial property for as long as it
remains on the market.

There is a process to go through before a bridge loan is approved. If
you've already developed a relationship with an institution, that's a
good place to begin. If not, it's time to start looking for a lender with
which you feel comfortable. Go through the bridge loan pre-approval
process to see how much of a loan you qualify for. With pre-approval in
hand, you can act quickly once a desirable commercial property becomes
available.

One general requirement for obtaining a bridging loan is collateral. Most
applicants will be asked to secure the loan with some sort of significant
collateral. Examples of collateral include heavy machinery, business
equipment, inventory, other commercial or residential properties owned by
or the applicant and even properties involved in the purchasing process.

Having a great credit history, for both your business and your private
life, and a solid relationship with a lender always helps when applying
for a bridging loan. There have even been situations where bridge loans
were approved with only a signature - no collateral necessary!

Even with good credit, however, expect to pay a slightly higher rate of
interest for this type of short-term bridge loan. One-half of a percent
or more is typical. The maximum length of a bridge loan is usually
twenty-four months. The lender has to make some money on the deal and the
higher interest rate is where the opportunity lies. Other factors are
also involved in determining the interest rate. The applicant's
calculated credit risk, the value of the items being used as collateral
and the amount of time the loan is needed all factor into the equation,
too.

If you think applying for a bridge loan makes sense for your situation,
work with a US Commercial Lending organization that specializes in this
type of loan. They'll help with all the steps necessary and they'll offer
advice along the way. Don't be afraid to shop around for better rates and
terms! The commercial lending market is very competitive and it's to your
advantage to do business with a lender that will work with you and not
against you.

				
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posted:12/27/2012
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Description: Investment, Money, Financial, Credit Card