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Bridge Loans: Powerful Interim Financing by brucecap

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									Title:-
Bridge Loans: Powerful Interim Financing

Summary:-
        Commercial mortgage and interim financing needs do not always fit neatly into traditional
financial instruments. Achieving success and capitalizing on commercial real estate opportunities often
requires the acquisition and effective use of bridge loans.

Body:-
        Commercial mortgage and interim financing needs do not always fit neatly into traditional
financial instruments. Achieving success and capitalizing on commercial real estate opportunities often
requires the acquisition and effective use of bridge loans. Bridge loans, a type of hard money loan, are
short-term financing tools that are generally backed by real property, or occasionally by other
collateralizing property. Hard money loans are essential for businesses to seize upon time-sensitive
opportunities.

        Bridge loans offer motivated and resourceful businesses an opportunity to obtain gap financing
from a private bank. This source provides bridge loans that can often be obtained quickly and can be
especially useful for commercial real estate investors that have short-fuse investment opportunities.
From completed application to disbursement, hard money loans are often closed in 21 days or less.

         Bridge loans are interest only loans compared to traditional commercial mortgages that
amortize the outstanding loan principal in each debt service payment. When comparing the interest
rate difference between a bridge loan and a traditional commercial mortgage, that analysis must also
evaluate the absence of loan amortization in the current debt service and its impact on cash flow.

        The documentation required for bridge loans is often less than that of a traditional loan.   Bridge
loans are more easily obtained when a well articulated exit strategy reflects that the asset’s       future
condition will qualify the asset for permanent financing. Bridge loan lenders usually require        that a
bridge loan be repaid in 1 to 3 years. For most businesses, this provides ample opportunity to       obtain
permanent financing.

         A bridge loan’s interest rate is driven by the cost of capital, risk of the investment, and the
experience of the sponsor. New sponsors will find that partnering with experienced investors reduces
the risk of the proposed transactions, thereby increasing the probability of obtaining a loan. Sponsors
can expect to be granted a hard money loan of up to 65% of the value of the securing property, and in
some cases a 75% loan-to-value.

        Today’s volatile economy has severely restricted the number commercial mortgages available
from commercial banks. Even established bridge lenders may be unable to secure funding for bridge or
hard money loans. To lend in this environment, private banks must communicate to potential
borrowers that today’s loan terms are not the same as those that were available during the peak of the
market.
Resource Box:-
David Wilson is the Managing Director at Bruce Capital, LLC; which provides commercial mortgage, hard
money loans, commercial loans, debtor in possession financing etc. For more information and current
lending parameters, please visit: www.brucecap.com.

								
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