The first quarter of 2015 saw a huge increase in the demand for bridge loans as many borrowers trying to obtain commercial mortgages from traditional lenders encountered delays. In order to counter the obstructions from the banks, many are turning to bridge loans to provide the necessary short-term funds until long-term funding can get approved.

But I heard banks are lending more on commercial properties this year?

Despite reports that banks are more willing to make commercial loans this year than last, there is still increased competition for these funds because of the high number of commercial-mortgage-backed securities that are coming due in 2015.  Borrowers interested in investing in commercial real estate should be prepared for this competition and plan ahead, both by submitting applications for traditional commercial mortgages and at the same time looking into the options offered by working with a private capital (hard money) commercial real estate lender.

What are the benefits of obtaining bridge financing?

Because hard money bridge loans can often be funded in less than 30 days with terms of six months to two years (though extensions of six months to a year are often available), they can save a lucrative deal and reduce the stress on the borrower as he or she waits for the bank to give their approval (which can often take one to three months). Bridge lenders also typically require interest-only payments on their loans, thus freeing up more of your capital for necessary improvements or construction projects that will increase your chances of getting approved by the bank. Another benefit of these loans when waiting for more permanent financing to come through is that they generally do not have any pre-payment penalties if your long-term financing comes through earlier than expected.

What pitfalls should you avoid when applying for a bridge loan?

While there are many ways to improve your chances of getting approved by the bridge lender, two common mistakes to avoid are as follows:

1. Research your lender and make sure your loan will be a good fit. Not every loan is a good candidate for a hard money loan. Finding out what criteria your hard money lender has before submitting your loan request can save you time and hassle.
2. Share the story behind your loan request. Telling your lender why you need the money and how you plan to pay it back will substantially influence the lender’s decision to approve or reject your loan.

For more information about bridge loans and Montegra’s lending criteria, contact us at 303-377-4181.