How to Use Commercial Bridge Loans

Commerical Bridge LoansSecuring a commercial bridge loan may be just the thing for your business whether you’re in between anticipated incoming funds or you need to take the success of your company higher faster than your bank is capable of. Bridge loans usually have higher interest rates than conventional commercial real estate loans, but have lower rates than commercial hard money loans. Bridge loans are inherently short-term, so they typically have a 6-month to 3-year time frame within which they need to be paid back.

Commercial bridge loans are used for various purposes including funding: working capital insufficiency, commercial real estate purchase acquisition, and improving your existing commercial properties.

Fund Your Working Capital Insufficiency

The time-frame between purchasing materials, manufacturing, then selling products or services is essential and worrisome for many company owners and managers. Since the cost of purchasing an assortment of materials needed for your business can be high, substantial business capital is often used every time a new product or service is in development meaning that the possibility of companies being unable to generate sufficient working capital to run their businesses during the interim could be high and comes at a high cost.

Your lack of working capital while manufacturing or waiting for products to be sold is commonplace for small businesses. Since your expenses continue to mount, you have employees to pay, utilities to maintain, insurance, day-to-day expenses and an assortment of other financial priorities that need to be taken care of, a commercial bridge loan can help “bridge the gaps” between materials purchase and end-product sales or interim time from when you get your newly developed product or service off the ground and the time you begin to reap profit.

Fund Your Commercial Real Estate Purchase Acquisition

Obtaining a bridge loan either to move your business to a different location or to expand operations is another common usage for a bridge loan, and unless you have a large amount of retained earnings, your finances could be greatly diminished without one. Another use for the loan is it being used as a way to secure property while waiting for your permanent commercial real estate loan to come to fruition. Many commercial loans can take anywhere between three to six months to process and fund. Obtaining a fast commercial bridge loan to secure your purchase can help if there is a tight deadline which would expire on the commercial property that your company is targeting.

Fund Your Existing Property Improvements

If your company has existing commercial property that needs renovations, you can use a bridge loan to make improvements on your property which can boost your bottom line and also create a higher resale value that you can take advantage of when the time comes. Commercial bridge financing can help you repair the existing structure which can help you to qualify for an even larger loan in the future or could also be used to pay down debt you may have acquired along the way. Doing this could help you get a better interest rate on your new commercial mortgage loan as well.

Shopping around for the best terms and interest rate on both bridge loans and conventional real estate loans is important. You will want to analyze these carefully because the lowest interest rates on a commercial loans do not necessarily represent the best situation for your business.

We hope you’ve found this information useful.  Feel free to share your thoughts, questions, and concerns in the Comment / Reply area below. Thanks & see you @ the Closing Table!

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