The “bridge loan” is a type of loan known as gap financing, interim financing, swing loan, or simply short term financing. The purpose of a bridge loan is to bridge the gap between current lending conditions and more advantageous conditions in the future. This bridge can range anywhere from 6 months to 3 years.

When banks and institutional lenders evaluate borrowers, the criteria or lending guidelines they scrutinize can be broken down into three categories: cash flows, timing, and risk. If a borrower is deficient in any of these broad categories, then their profile will be outside what institutional lenders are comfortable with.

To be outside of a lenders borrower profile doesn’t take much. For example, properties in prime retail locations not currently generating enough cash flows will be turned down. In this case, a bridge loan could be an excellent option while stabilizing the property. Then, financing from a bank can more easily be obtained

Another situation in which bridge lending may be helpful is one in which the time constraints of a deal do not allow the necessary time to secure bank financing. Banks typically require between 30 to 60 days to underwrite a commercial real estate loan request.  Institutional lenders such as life insurance companies need even more time.  This offers a perfect example of the use of bridge financing.   The opportunity to   secure a property at a better price by acting quickly and then refinance later with a traditional lender is a scenario that is seen with increasing frequency in today’s market.

Numerous other situations exist when a real estate borrower may need to bridge the gap between two time periods. Call Bob Amter or Kim Skari at Montegra today to see how we can help you with your current bridge loan borrowing needs.

This blog was written by Bob Amter, President of Montegra Capital Resources, LTD., a Colorado hard money lender.  [google_authorship] has been in the private capital lending business for 41 consecutive years.