A bridge loan is a financial transaction in which a property owner borrows against the equity in a current property so as to be able to finance a new property purchase. When that new property has been acquired, the first property will eventually be sold so that the bridge loan can be repaid. In effect, the current property provides a kind of bridge for the purpose of acquiring that new property.

Types of Bridge Loans

With one kind of bridge loan, it will be possible for you to obtain capital for a tract of land that you need, and this can be for industrial or commercial purposes. There are also bridge loans available for residential properties, including single-family dwellings and multi-family buildings. You may also want to secure real estate for the purpose of investment, in anticipation of establishing a regular income from it.

Another kind of bridge loan is available for an owner-occupied residential arrangement, in which you would actually live on the premises, while also generating income from another tenant in the building. Not all lenders will offer all these types of bridge loans, so you’ll have to seek out a lender who provides the specific kind of bridge loan you’re looking for.

Bridge Loans versus Bank Loans

If you apply for a bridge loan with an alternative lender, you will invariably consume far less time during the approval process. Even if a conventional bank does approve your application, it will still be considerably longer before you have the cash in your hands. One of the reasons borrowers choose bridge loans is that it’s easier to apply for them, and it generally doesn’t take months to be approved. The drawback to a bridge loan is that there is usually a higher interest rate attached to them, but even this is not a serious problem, since bridge loans are almost always short-term loans that can be paid off within a year.

Would Your Company Benefit from a Bridge Loan? 

If you’re waiting on the sale of one of your assets, you may need cash now to purchase another asset essential to your business. Contact us at LMC Alternative Business Capital to explore ways that a bridge loan could solve your financial issue.