Bridge loans are one of the main ways in which private capital or hard money lenders help borrowers get out of sticky situations by getting them the financing they need when they need it. With their short terms and higher interest rates, bridge loans are not the answer to every situation, but there are many situations in which they are the best—if not only—answer. Here are three common scenarios when bridge loans are the financing vehicle that can go the distance (and bridge the financing gap):

1. Value-added properties. This is perhaps the most common scenario that attracts bridge loans because these short term loans can be used to purchase or reposition an underperforming or underutilized property and rehab it to make it profitable again. One of the main reasons that bridge loans are ideal in this situation is that private capital lenders have the freedom to choose whether to use the purchase price or the after-repairs value as the basis for their loan-to-value (LTV) rate and will typically choose the higher of the two rather than the lower as bank lenders must. This means that it’s possible to get a bridge loan that will cover both the purchase price and the renovation costs to improve the property.
2. Undeveloped land. Bridge loans can be helpful with raw land deals because private capital lenders are more willing to accept the higher risks associated with these projects. Bridge loans can be used to assemble multiple parcels into one larger acreage or hold onto a property while construction plans are being finalized. It’s important to remember though that even private capital lenders will want to see that easements and zoning issues have been resolved before they will fund a bridge loan on undeveloped real estate.
3. Recapitalization. When a business owns has substantial equity in his/her real estate holdings and would like to access it for business recapitalization, or even for another business venture, a private lender is much more likely than a bank to consider the request and also can get the loan funded much more quickly.

The bottom line with bridge loans is that they can be closed quickly (in a matter of a few weeks, usually) and get investors through situations where conventional lenders often fear to tread. Contact Montegra at 303-377-4181 if you have questions about our bridge loan programs.