Commercial Bridge Loan

Bridge Loan for Commercial Real Estate

Commercial Bridge loan are just that, interim loans to “bridge” the gap between the current situation and the exit strategy. Bridge loans typically have some cash flow but for some reason, will not qualify for conventional lending right now. You see these on investment properties and business owned properties.

We closed a $3 million plus commercial bridge loan on an apartment complex purchase, a very common type of bridge loan.  Because the complex was only 67% occupied and needed work, it would not qualify for conventional financing.  Experienced investors with good credit are beginning to gobble up these properties at great prices and with their knowledge and some work; they can often fill the property up in less than a year.  Bridge loans are typically 75-80% of value/sales price, 7.5%-12% in interest rate, 2-3 years fixed, interest only payments and points can range from 2-6. Is it cheap? No.  But you cannot get a FNMA right now because of the occupancy rate.  The key is, you are buying a property at $3 million, that once full, will be worth $6 Million – doubling your money. Then, a refinance in 90 day to 12 months starting around 7.5% rate is easy. The result is $3 Million in profit! Yes, the rate you paid was higher than normal for 90 days to a year but that extra interest of $120K yielded them a $3 Million return. What a deal!

Does loan amount size matter in commercial bridge loan?

Yes.  Many lenders will not finance if the loan amount falls below $10,000,000.00 and some minimum requirement is $3,000,000.00.  Well, good news!  We have commercial bridge loans amount products that go down to $250,000.00 dollars.

What do underwriters want to know in order to approve the loan?

The underwriter wants to know how you are going to make the monthly payment and how you are going to pay off the commercial bridge loans also known as the “exit strategy”.  I suggest you have two ways you can pay off your loan to make the loan appealing to the underwriter.

What are the Commercial Bridge Loan Rates?

Rates typically range from 5.5% to 12%.  The rate will depend on:

• Loan Amount
• Property type
• Term Length of the loan
• Your credit
• Loan to value
• Location
• Population
• Etc.

How long are the terms of Commercial Bridge Loan?

The note terms for commercial bridge loans are when the loan will be due in either 3 months, 6 months, 12 months, 24 months or 36 months.

What are the Loan to Values?

The typical loan to value ranges from 60% to 75%. The exception is if there is an SBA loan that will be taking out the bridge loan. The SBA commercial bridge loan will be fully underwritten so the loan will need to debt service but the values can go as high as 90% ltv.

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