Simply explained, a bridge loan is a short-term loan designed to get a borrower from point A to point B. A bridge loan is commonly used in the real estate industry to fund the acquisition or refurbishment of a property and remains in place until permanent financing can be found.
Commercial Real Estate Bridge Loans
An investor finds a deal on an income-producing property with a vacancy and some work to do. They might secure a bridge loan to finance the acquisition, renovation, and lease-up of the property to get into the deal swiftly. After the property has been leased, permanent financing could be acquired, with the earnings utilized to repay the bridging loan.
Another example is a seller who offers a discount on a property's purchase price if the buyer can close within 30 days. To complete the transaction swiftly, the buyer would take out a bridge loan. A permanent loan might be arranged after the bridge loan was paid off, and the proceeds used to pay off the bridge loan.
Non-Commercial Real Estate Bridge Loans
Bridge loans can also be used for non-real estate purposes. A small business owner, for example, may receive a significant order from a large corporation. They are unable to develop the product due to a lack of cash. They can get a bridge loan to cover the costs of production, shipping, and carrying the order. The bridge loan is paid off with the proceeds from invoice payments. The profit on the order is the difference between the invoice amount and the bridge loan amount.
Monroe Funding Corp has a wealth of experience and knowledge to help you reach your investing goals. To learn more about Florida Commercial Real Estate Loans, contact us online or by phone at +1 (954) 419-3539.
