Bridge loans are sometimes called hard money loans, because they are most often based on hard assets such as vehicles, real estate, or equipment. The reason they’re called bridge loans is that they often serve as a bridge over to a secondary transaction, for instance purchasing some other asset which is made available for only a short time.
Traditional banks are generally unable to offer this kind of financial product, because they simply don’t have the flexibility for one thing, and because their loan processes consume way too much time, for another thing. Bridge loans are generally made available by alternative lenders, who can be much more flexible by providing immediate funding, because they’re able to bypass many of the regulations and constraints which apply to traditional banks.
Advantages of bridge loans
In addition to the fact that bridge loans can generally be arranged much more quickly than traditional bank loans can, there are a number of other very appealing aspects to bridge loans. When that secondary transaction is only offered for a short period of time, arranging for the necessary funding simply has to be conducted in a very prompt and efficient manner, and bank loans simply lack the flexibility to be carried out in this way.
A bridge loan can also fill the gap when you don’t have the investment funding required for a secondary transaction, and it can be a critical source of funding while you’re waiting for your real estate to be sold on the open market. Bridge loans are also quite often used to buy out partners who are interested in taking a different path and pursuing other interests, which of course leaves you as a sole proprietor in your business.
Another appealing aspect of bridge loans is that they have a flexible payback, meaning that in many cases there will be sufficient interest reserve in your real estate collateral to allow for a considerably larger loan to be granted, which will then provide you with more flexible repayment terms.
Lastly, as opposed to conventional loans, there are generally no specific requirements associated with a bridge loan. That means you’re free to negotiate with an alternative lender so as to structure a bridge loan which is as favorable as possible to your business, and which the alternative lender can still approve.
Would a bridge loan help your company?
If you feel that a bridge loan would be a financing opportunity that would significantly help your business, we may be able to help. Contact us at Norus Capital, so our financial specialists can discuss some possibilities for arranging a bridge loan to help your business.