The first step toward securing a commercial bridge loan is to make sure that you have a deal that’s profitable for your Company and your prospective commercial real estate lender.  As a general guideline for standing (existing) property  purchase financing, you should be “all-in” (purchase price + renovation/improvement costs) is somewhere south of 70% of the After Repair Value or ARV.  The lower that percentage, the stronger the deal for you and your lender. In fact, since bridge loans are more expensive in terms of higher interest rates, we like our Clients to be all-in @ less than 65% of ARV just to have an extra profitability contingency cushion.  That way, we’re all covered just in case…

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Securing 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.

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A commercial bridge loan is a short-term loan that is used to bridge the gap between various financial expectations.  Typical transactions have an urgent time-frame to close, a very strong value proposition, and a clear-cut exit strategy within 6 to 36 months, often with 1 or 2-year extensions available for extra fees. 

In order to compensate for the higher level of risk and often extreme speed of loan execution with relatively low documentation requirements, commercial bridge loans are generally considerably more expensive than conventional loans in terms of higher interest rates and points.  As additional compensation, commercial bridge lenders also mitigate risks by having lower loan-to-value ratio requirements as well as requiring cross-collateralization in certain circumstances.

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