It is almost surprising how most business people look at a commercial bridge loans and assume the worst. Of course, like any other commercial loan option, there will always be pros and cons but that doesn’t mean you or anyone should just write these particular loans off.
As you may already know, a commercial bridge loan or a non-residential bridge loan is basically short-term or rather interim financing for a commercial or investment property. Many businesses, developers, and commercial investors choose to utilize this particular kind of financing because it helps them achieve a particular purpose quickly. Yet, despite this specific benefit, many people seem to be wary about obtaining a commercial bridge loan.
The reasoning behind this apprehension seems to be based on several common misconceptions. For instance, many people see a commercial bridge loan as just another debt i.e. another debt they are adding to the pile. But, as previously mentioned, that’s really not what a bridge loan is at all. Remember this particular kind of financing helps you cover costs or move quickly on a property while you secure long-term financing, which is generally used to cover the bridge loan.
Another common misconception is that getting non-residential bridge loans means extremely high interest rates. Well, the truth is yes, these particular loans do come with a higher interest due to the short time period that they generally cover. But, again it’s a higher rate not a completely unreasonable one. In fact, the only time you will ever encounter extremely high rates with a bridge loan is if you exceed the timeframe you originally selected. In other words, if you secured a bridge for 3 months but you are able to pay it back in that timeframe due to issues with long-term financing then your interest rates will likely go up or you will incur additional costs and penalties.
In addition to not fully understanding the terms and costs of non-residential bridge loans, people also tend to believe that these loans are strictly for property acquisitions. But, the truth is commercial bridge loan can do so much more. For instance, you can use a non-residential bridge loan to cover the cost of raw materials for improvements or if you need to ensure that business will continue as usual in the light of corporate and company changes i.e. a business partner leaving, etc. So as you can see you can do a lot of things with your bridge loan. Nevertheless, it is still important to note these particular kinds of loans cannot replace regular loans. Moreover, you really wouldn’t want these particular loans to replace regular loans due to their higher interest rate, which would make your loan more expensive overall. With that being said, if you need short-term financing assistance a bridge loan is more than capable of helping make your business or commercial investment dreams come true.
Ultimately, non-residential bridge loans can provide you access to funding when you need it. Thus, it is always beneficial to do your research i.e. figure what is fact and what is fiction. In doing so, you will ensure that common misconceptions don’t put a wrench in your business plans.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.