The name implies that commercial bridge loan are a type of loans that is secured with commercial real estate. They fill in the gaps to you, the borrower who force their way through between you and your next transaction. This kind of commercial financing permits you to overcome financial constraints and take advantage of the opportunities that are time-sensitive in a quick and effective manner.

Commercial bridge loans permit the access of temporary funds that can bridge the gap in cash flow, and allow you or your firm to finish an temporary task. For instance, if you have a balloon payment due to be paid on a loan you have it is possible to manage the payment until you can obtain permanent financing. If there's a very limited period of time that a particular item of real property for commercial use is offered and you want to make use of bridge financing to purchase the asset and then pay off the bridge loan by using the proceeds of the permanent financing. In essence, commercial bridge loans provide temporary funds that can be used until you decide to sell or refinance your property, or make improvements to, or complete or even sell your property.

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In order to take advantage of their short-term character and higher risk they are likely to carry higher rates of rates of interest than loans that are permanent. Commonly, commercial bridge loans are characterized by durations that vary from 6 to 12 months. A majority of commercial lenders allow you, as the borrower, to extend the term of your bridge loan for an additional six months or one year at an additional fee , which typically can range from a quarter-point to 2 points per.

This kind of financing is usually paid off by the borrower who has placed permanent finance on the property after the improvements are completed and new tenants are able to move into the property. Because of their short-term character commercial bridge loans typically don't have penalty for prepayment.

Let's look at a typical scenario. Imagine you own an apartment complex of 250 units with a 60% occupancy in a great location that is under contract at $10 million. Due investigation has revealed that the property could have a value of $22 million following only $3 million of renovations that will take up to 7 months following which you're likely to to raise rents to be able to justify the increased post-renovation value. After that, you can collateralize the apartment complex with an $13 million commercial bridge loan to pay for the purchase and renovations, finish the renovations and lease the complex at a higher than 90 percent occupancy rate, and then seven months later, you can refinance it by securing a permanent $22 million loan typically as a traditional commercial mortgage loan that is based on the more expensive after-renovation valuation of which you pay back the original bridge loan in total.

Commercial bridge loans can provide short-term financing when you require to to cover gaps in relation to cash flow generated by operations as you work on projects as making improvements, finding clients, selling buying or refinancing real property and then pay back the commercial bridge loan using a portion of the profits from the permanent financing you are able to secure.

Charles Emery is a Commercial Real Estate Finance Consultant at Radiant Properties LLC, a Philadelphia, PA based real estate investment and commercial estate financial consulting firm. Prior to launching his own business, Charles worked as a Commercial Credit Analyst for an important Philadelphia regional bank in the area in which he assisted Commercial Lenders with financial, business and industry analyses that Loan Officers made their funding decisions for commercial loans. He also conducted marketing and sales calls, as well as new business prospecting in the course of his duties in the field of commercial lending.

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