When time and cash flow are of the essence, bridge loans are often a viable financing option. By checking out this article, you’ll learn about the purpose of bridge loans and their unique strengths.
Defining Bridge Loans
Bridge loans fit under the umbrella of short-term financing. They have the word “bridge” in the name because they bridge the gap between when a company or person needs money and when they would actually have the money without financing. They commonly pop up in the real estate world, particularly when a borrower wants to buy a new home before they’ve finished selling their old one, or when cash is tied up for another reason.
The specific terms of a bridge loan will value from lender to lender and from situation to situation. But a common setup involves the lender extending up to 80% of the value of the home the borrower is trying to sell. Interest, fees, and a repayment plan will apply.
Benefits of Bridge Loans
Bridge loans are a viable solution in many situations. One is when a person must relocate for a job: Juggling the sale of one home and the purchase of another is hard enough, but it can be especially complicated when the homes are in two different areas. A bridge loan can help a relocating person not miss out on a good home in their new city.
House flippers and real estate investors may also find bridge loans of use. When a new, attractive opportunity presents itself, it can be a shame to miss out because funds are tied up in a previous transaction.
Speed is a huge perk of bridge loans. They usually involve a much faster application and approval process than do traditional bank loans. That makes them ideal for when a good real estate deal isn’t going to be available for long.
How to Learn More about Financing Methods
Need financing to launch a business or take advantage of an opportunity? To start assessing your options, contact the professionals at GM Capital Group.