A10 Capital funds bridge loans to accommodate its customers’ unique commercial real estate situations. For more information on A10 Capital’s bridge loan program, call us today at 877.577.5055. The following provides a synopsis of what bridge loans are and the bridge loan industry.
A bridge loan provides the customer with interim financing until a commercial real estate property stabilizes and permanent or next stage financing can be obtained from a conventional commercial mortgage lender to "take out" (i.e. pay back) the bridge loan and meet other capitalization needs the customer may have. Wikipedia states that bridge loans are typically more expensive than conventional commercial mortgage loans due to the higher risk nature of the commercial real estate involved, thereby resulting in a higher interest rate, points and other costs amortized over a shorter period, as well as various fees and other "sweeteners" sometimes required (such as equity participation by the lender in some loans). To compensate for this inherent higher risk, a bridge loan lender may require cross-collateralization and a lower loan-to-value ratio; however, bridge loans are typically arranged quickly and require less documentation than a conventional commercial mortgage. An even more-compelling reason to obtain a bridge loan is the quick availability of funds that allows the customer to exercise a project opportunity AND retain control of the project … and the profits once the property stabilizes … since bridge loans can be utilized in lieu of bringing an investor or partner into the project to meet the customer’s short-term cash needs.
Bridge loans are often used in connection with commercial real estate, whether it be to quickly close on a property, acquire commercial real estate from foreclosure, or take advantage of a short-term opportunity and provide additional time for the customer to secure a long-term conventional commercial mortgage loan. Bridge loans are typically repaid when the property is refinanced with a conventional long-term commercial mortgage lender, the borrower's creditworthiness improves, the property is improved or completed, a specific improvement or change that allows a permanent or subsequent round of commercial mortgage financing occurs, or the property is sold. The timing issue may arise from development phases with different cash needs and risk profiles as much as ability to secure a conventional long-term commercial mortgage loan. A bridge loan is similar to a hard money loan in that both are non-standard loans obtained due to shortterm, or unusual, circumstances and are often secured by a commercial mortgage. The difference is that hard money refers to the lending source, usually an individual, investment pool, or private company that is not a bank in the business of making high risk, high interest loans, while a bridge loan refers to the duration of the loan.
Wikipedia reports bridge loan interest rates secured by commercial mortgages are usually 12-15%, with typical terms of up to 3 years. A bridge loan lender will typically charge 1-3 points higher than a traditional commercial mortgage lender and require loan-to-value ratios that generally do not exceed 65% for commercial properties, based on current appraised fair market value.
Most banks do not offer commercial real estate bridge loans because they typically do not fit the bank’s lending criteria due to the speculative nature of the property, the higher level of risk, lack of full documentation, and other factors. A bank that issues bridge loans might also have difficulty justifying its lending practices to its investors and government regulators. Accordingly, bridge loans are more likely to come from individuals, investment pools, and businesses like A10 Capital that make a practice of providing bridge loans and are staffed with the expertise to get the deal done in a manner that meets the expectations and timeframes of the customer.
Call A10 Capital today for a bridge loan and let us help you seize your opportunity without delay. Call toll free 877.577.5055.