Commercial bridge loans are very useful for properties in transition, such as a newly constructed hotel as it reaches stabilized occupancy, or a repositioned shopping center during the re-tenanting period. Sometimes non-recurring events cause a property to lose tenants or occupancy. Commercial bridge loans have two primary characteristics. They are short term loans and they put the impetus on the borrower to define a clear exit strategy. Nobody wants a bridge to nowhere, and lenders do not either.
Borrowers also like to use these types of loans when they feel there is upside in the property cash flow which would allow them to borrower more funds in the future. Also borrowers can use these short term bridge loans when they don’t want to lock in long term financing. If they think that there will be more favorable financing available for their property in a few years, a short term bridge loan can be a good hedging strategy.
Financial Compound is a commercial mortgage broker that works with numerous commercial bridge loan lenders who don’t require an exit strategy, and are happy to make bridge loans for certain property types and cashflow characteristics that would normally otherwise require long term permanent financing.
In 2010 commercial bridge loans are also great alternatives for maturing loans that need to be refinanced. Currently the permanent mortgage market for commercial properties is not as robust as it used to be prior to the credit crunch in 2007 and commercial bridge lenders can fill in the gap. Their commercial bridge loans offfer many of the features of long-term fixed rate financing although the loan term is usually 5 years or less. A benefit of commercial bridge loans; though, is the interest-only feature that many commercial bridge lenders offer. A typical commercial bridge loan might be a 3 year loan with a 6% interest rate, interest-only. non-recourse, 1/2% lender fee, no prepayment penalty.