Bridge Loans

Bridge loans are a type of short term loan. They are also called swing loans. In general, bridge loans are taken for a maximum of 3 years waiting for funding long-term or higher. The purpose of the loan is just to cover the interim period until more permanent financing can be arranged. Once the new loan is granted, the money will be used to repay the bridging loan.

Bridge loans have a higher interest rate than traditional loans. It is not uncommon for creditors to require cross-collateralization and to designate a low loan-to-value ratio in order to reduce their risk. However, the bridge loans are able to be arranged quickly and does not require an enormous pile of documents.

Bridge loans are commonly used for property purchases to close quickly on properties, use of a short-term opportunities, or retrieve a wealth of foreclosure. When the property is sold or refinanced, the loan is generally returned.

Bridge loans are similar to hard money loans are not as both traditional and obtained for special circumstances or emergencies. The main difference is that money is hard to refer to the source if an individual firm, private company, or investment. References bridge loan of the loan.

The interest rate for a bridge loan is generally 12-15% for up to 3 years. For commercial properties, the Loan-to-value ratio exceeds 65% and 80% for residential real estate. Loans may be issued with a closed or open for payoffs.

Banks generally do not offer real estate bridge loans because of the high risk and lack of documentation does not meet the criteria for funding the sector. A bank would have difficulty justifying its lending practices to government regulators and investors, if issued bridge loans. Consequently, most bridge loans are generated from individuals, corporations and investment pools.

Bridge loans are used in corporate finance and venture capital as well. They can inject small amounts of money to bring a company through consecutive major private equity funds. Moreover, they can help a company in difficulty, while looking for a buyer or investor more. If a company is sold, a bridging loan can finance the debt before the final offer to the public.

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