Bridge Financing

Bridge financing is a temporary solution to your financing needs. A common type of bridge financing is construction financing. Normally a construction loan will be in place for 6 to 18 months. At the end of the construction term a new long term loan pays off the construction loan. Some lenders will write a construction loan that converts to a long term note at a specified date (mini-perm).

I have also seen bridge financing used to purchase real estate in foreclosure. Because buyers prefer to negotiate a discounted price and want to close quickly, bridge financing can provide the negotiating leverage many real estate buyers want when picking up discounted properties for their portfolio.

Once the property is acquired, the buyer then seeks to improve the value through improvements or NOI from leasing to improve the value. Once the property has seasoned for about 9 to 12 months and the improved value has been established, these owners then seek for long term financing on the property.

The point to bridge financing is to help borrowers get the money they need quicker to accomplish an interim need that traditional lenders may not be comfortable financing. With that in mind, bridge financing lenders like to be repaid within 12-18 months on the loans they issue.

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