A Bridge Loan is a Stepping Stone
A bridge loan is not a loan used to build a bridge but rather is used as a sort of ‘stepping stone’ loan for borrowers. Using real estate as collateral for a bridge loan, most bridge lenders lend on houses, commercial buildings, and land. Bridge financing comes not from a bank lender but rather from a non-bank source of financing. Particularly for those who need a quick financing solution, and don’t have the luxury of time, a bridge loan can close much quicker than a bank loan. Also for situations where a borrower may have bad credit, a vacant property, or issues with property occupancy, a bridge loan is a viable alternative to a bank loan. But why is this type of loan referred to as a ‘stepping stone?’
Unlike a bank loan, a bridge loan is a temporary loan that allows a borrower to get from point ‘A’ to point ‘B.’ Whether it be due to timing or for another reason, sometimes borrowers cannot qualify for a bank loan and will need an interim financing option. Bridge loans serve as a stepping stone to another form of financing such as a bank loan, or to the sale of the property being used as collateral for the loan. Sometimes a bridge loan can be a term as short as 30 days, or up to as long as 5 years. This depends on how long a borrower needs to get an exit on a bridge loan.
Many real estate investors are new to the concept of bridge financing. Up until the crisis of 2008, many borrowers only took out bank loans. There was never a need for a bridge loan because banks were readily lending on investment properties. These days, getting an approval on an investment property at the bank can be a long, arduous trial that usually results in no loan. For this reason, many real estate investors are having to seek out new forms of financing, and a bridge loan is a top choice.
If you are seeking out alternative financing, learn more about the approval process involved in obtaining a bridge loan. It’s as easy as 1, 2, 3. Take a look at our programs here.