Bridge Loans

Bridge loans are often times misunderstood. Many people search for a bridge loan without really knowing if that is what they need or not. It seems sometimes these days that bridge loans is being used interchangeably with hard money loans, but that is not correct.

A bridge loan has a specific purpose, while a hard money loan is simply a loan made by a private investor (typically). The main purpose of a bridge loan is to bridge the gap between two more permanent financing solutions. Bridge loans are typically more costly than traditional loans or even longer term private money loans, but people are willing to pay this higher cost simply because they don't have long term financing options available.

One of the biggest reasons you may need a bridge loan today is to complete unfinished construction. There are not many sources for construction financing, so a bridge loan can give you the funding needed to complete your project in order to get to the point where you can then finance the property with a long term loan.  Typically this point comes after all construction is complete.

Areas that were hot in the real estate market buildup are now areas that may require more of this type of lending.  For example, the San Francisco market was very hot, now there is a real need for San Francisco bridge loans.  Anywhere you find unfinished construction, vacant builders lots, etc, you will likely find a need for bridge financing.

This is one example of a hard money bridge loan needed. This project was taken back by a group of investors in an unfinished state. It is a multi-unit project, and they needed funding to complete the construction.

Once construction was complete, they planned to take out the short term bridge loan with a long term institutional loan that allowed them to hold the property long term and collect rents.

Without a bridge loan, these individuals would have needed to come up with the cash to complete the project before they were able to obtain financing. The bridge loan was expensive, but it allowed them to use borrowed funds rather than requiring cash to complete the build out.

You can visit this site for more information on bridge loans and San Francisco commercial loans in general.