A bridge loan, which can also be called a hard money loan, is a short-term loan that is used until a person or company can secure permanent financing. Basically, they "bridge" the gap between today's need for immediate cash to pay bills and the final closing of a pending investment deal or long-term financing package.
Bridge loans are usually offered for terms of 12-36 months and many can be refinanced into low cost, long-term financing through a lender. Bridge loans are not only for shorter terms, but are also needed to close quickly, so the borrower can take advantage of the opportunity to arrange for a longer term loan when they are ready. Speed is also an important factor in financing a bridge loan because the borrower may be trying to restructure debt or avoid claming bankruptcy.
Some borrowers look for a bridge loan to span the gap between the two transactions of buying a new home and selling the old one. However, most bridge loans are used in purchasing or refinancing commercial real estate. There are mortgage bridge loans and commercial bridge loans for various income properties including; apartments, industrial buildings, retail, hotels, healthcare, and mixed use.
For more information on a bridge loan, visit Security National Capital.
About the Author
Michael Southard is the Vice President of Security National Capital.