BRIDGE & HARD MONEY

What is a Commercial Bridge Loan?

Commercial bridge loans are short-term commercial real estate loans that are used for the purchase of commercial properties when permanent financing is not an option. Our PHD Financial team facilitates short-term commercial bridge loans for real estate acquisitions as well as redevelopment of existing assets. We typically seek bridge financing for a property that needs significant renovation before it will qualify for permanent financing.

However, there are other reasons we may consider a bridge loan for a borrower:

  • The property has unsatisfactory occupancy rates
  • The borrower’s credit profile needs improvement
  • The borrower can’t wait for permanent financing
  • Incomplete ownership / project team in place
  • Non-stabilized property without historic financials

Commercial bridge loans can be used for the purchase or refinance of office buildings, hotels, retail property, multifamily housing including apartment complexes, and even for raw land that will be developed for commercial purposes.

PHD Financial has a nationwide footprint and can close loans in as fast as two weeks.

Some features of a bridge loan include:

Short term financing

Bridge loans typically have repayment terms of between 6 months and 3 years, after which the property is either sold or refinanced with permanent financing.

Quick closings

Bridge loans can be closed in as little as 2 weeks

Loan amounts based on fully improved value of the property

rather than its “as-is” value Commercial mortgage bridge loans provide the capital that a real estate investor needs in order to close on opportunities quickly and complete necessary

renovations (if needed)

No prepayment penalties

An investor can quickly either sell or refinance into permanent financing with affordable monthly payments. Oftentimes there are, in fact, prepayment advantages.

Higher interest rates

Bridge loans typically carry a rate about 2% above the average of fixed rate loans/

Unlike SBA 7a loans or CDC/SBA 504 loans, which require the majority of the property be used for your business to operate out of, commercial mortgage bridge loans can be used for non owner-occupied property. That means bridge loans can be used on commercial investment properties and income producing properties.

Commercial bridge loans can also fill the void where a conventional loan is a challenge for certain borrowers based on their legal partnership entanglement, lower occupancy levels at the property, and any previously filed bankruptcies. In addition, if the borrowers are foreign nationals, they have a tougher time obtaining a loan through conventional banks and other institutional lenders.

To find out more about Bridge Financing, contact PHD Financial today at 561.508.7558.

What is a Hard Money Loan?

Hard Money Loans are similar to Bridge Loans in that they are shorter term loans with higher interest rates.

Hard money loans are often sought after for a borrower that has insufficient credit, so the criteria focused on the asset, more than the borrower.

Non-performing or under-performing investments, or businesses without sufficient cash-flow would also benefit from a hard money loan. This is money used to transform an investment or business from non-performing status to performing status and needed only for a short period of time.

A hard money loan is usually interest-only and for a six month to three-year time period, because it is only intended to be a short-term fix.

PHD Financial can then secure long-term financing once the project is sufficiently cash-flowing thus going from “non-performing” status to “performing” status.

Because hard money loans are granted by private lenders, the application process, approval and closing can happen quickly.

This type of loan is risky for the lender though, so interest rates are high, potentially 10% or greater and there are usually prepayment penalties as well.