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Commercial bridge loans are a flexible loan method intended to provide short-term financing until a borrower can get more permanent financing, such as a mortgage or term loan. These loans are popular in some markets, including the real estate market, where they act as an excellent source of interim financing for real estate projects but not serving as permanent financing.
Many people living in New York are familiar with these loans when purchasing commercial property. Although these loans have substantial benefits, they also come at a price. If you are searching for a Commercial Bridge loans in New York for commercial property, like buying an investment or fix and flip project, then continue reading this post. You will learn what precisely is a Commercial Bridge Loan in New York, what it might cost you, what it does and whether or not it’s a smart solution for your needs.
Bridge loans are also commonly called swing loans, interim, or gap financing. These loans provide short-term financing to bridge the gap while a company or an individual try to secure more permanent financing or reposition the property for a sale. These interim loans offer immediate cash flow options for borrowers who need to meet other obligations while they explore their long-term financing options. These obligations vary, as some bridge loans are used to meet financial needs related to a commercial real estate. Other bridge loans do not involve direct expenses related to commercial property but instead, used to help meet working capital needs.
A property owner who needs an interim solution to fill in the gap between selling his or her existing property and buying a new one often turns to bridge loans. You only need to back a bridge loan with some form of collateral, such as commercial real estate and/or equipment. When you use a commercial property as collateral for one of these loans, it’s called a commercial bridge loan.
Commercial bridge loans are meant to act as temporary financing between a long-term mortgage or repositioning for a sale for a piece of commercial property. These types of loans have different terms and repayment structures. The rates vary depending on factors like property type, duration of loan term loan to value ratio, and in some cases the credit of the borrower.
Commercial bridge loans are generally in the range of 1-2 points closing fees. 1 point means 1 percent of the loan amount. Some banks or lenders will add other fees such as underwriting fees or document processing. Here are some sample fees.
• Escrow Fee
• Title insurance
• Recording fee
• Notary fee
• Administration fee
• Appraisal fee
• Wire/courier/drawing fee
For real estate in New York, commercial bridge loans may be used for a variety of reasons, which includes renovating and selling property over a shorter period, purchasing a property under a tight closing timeline, or retrieving properties from foreclosure.
Other uses of commercial bridge loans in New York could include finding a new tenant, resolving a short-term issue affecting the property, stabilizing the cash flow of the property, or the creditworthiness of the borrower that prevent him or her from getting permanent debt on the property.
Commercial bridge loans typically have terms between 6 months to 5 years with an agency like Clopton Capital and are paid back upon the property being sold or refinanced. You can use this loan to purchase property and bring it up to the standards of a traditional Commercial Mortgage in New York.
Investors can get a bridge loan from a bank, private lender, credit union, or alternative lender. We recommend exploring the idea of getting the loan from the same bank or lender that will make the long-term financing or mortgage. The property securing the loan determines bridge loan eligibility. With commercial bridge loans, the value of the property to be purchased acts as the collateral.
A commercial bridge loan may be funded in a matter of days to weeks faster than a permanent conventional business loan. While individual credit scores do not play as significant a role in commercial bridge loan eligibility, there are specific qualifications that lenders may look for, individual net worth and sufficient cash reserves as well as previous experience with similar real estate projects may be required.
Commercial bridge loans make sense when getting cash-flow help or purchasing commercial real estate while waiting for long-term financing. Bridge loans can provide an immediate solution for borrowers. Here are some benefits offered:
• It gives borrowers short-term capital
• Required no payment on the loan until the term is up
• Ability to buy a move-up home or property
• Cash-flow infusion for businesses until they can close long-term financing
• Help prepare a commercial property for traditional Commercial Mortgages in New York
A commercial bridge loan might be the right type of financing for you if you’re looking to buy a property that will need substantial capital for both the purchase and property improvement. It’s recommended you research the interest rate, fees, and terms associated with a bridge loan to get the best possible loan. Given the current state of the real estate industry, a commercial bridge loan is an ideal form of financing.