commercial bridge loan
NON STABILIZED COMMERCIAL PROPERTY
With or Without CAPEX
Introduction
The Multifamily Loan Program offers real estate investors an excellent long-term financing option for a great asset class. Multifamily properties are substantial assets for investment groups and real estate investors. They provide ample housing to numerous tenants or families and occupy the least amount of land footprint.
Not only do multifamily properties provide housing for multiple occupants and have a high appreciation rate with a cash flow advantage. They are profitable assets for real estate investors or corporations that own them. Multifamily properties can be easier to manage for investors or management companies they hire because all the tenants are in one location. Managing multiple units under one roof is more effortless than handling multiple rental units in different pockets of areas.
Program Overview
Our commercial bridge loans are generally 6-24 months with rates between 7.5 – 13% with lender fees between 2 – 4%. We can fund nationwide favoring larger MSA locations.
Our commercial bridge loans fund up to $30 million. Our target would be between $500,000 to $10 million.
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Quote Requirements
Several factors impact a quote for a commercial bridge loan closing cost, and providing necessary information prevents inaccurate quotes and assumptions. Until we understand what the loan request entails, we would ultimately require more documents to help understand and verify details. Here are some of the basic details (if applicable) to properly provide a soft quote or interest:
- Executive Summary
- Purchase price
- Loan amount
- Rehab budget (CAPEX)
- Soft cost spent
- Total Budget
- Building Plans
- Sources and Uses
- Contractor info
- Borrower(s) Personal Financial Statement
- Borrower(s) Real Estate Resume
- Borrower(s) Real Estate Owned list
- Appraisal / Environmental (if any)
- Payoff
- Rent Roll
Due Diligence
If a quote has been provided and the investor agrees to proceed, a letter of intent will be issued and a due diligence fee would be due at signing and this would go towards appraisals, environmental (phase 1), engineering, zoning reports, and any other lender or agency reviews/reports needed for underwriting.
The Due Diligence fee will be dependent on the size, condition, and location of the property and due to 3rd party quotes, this can range from $5,000 to $30,000 respectively.
Item Review:
During our Due Diligence, there will be several documents we will request for in-house review while awaiting 3rd party reports and having them current and readily available to help streamline the process for our underwriters.
Guarantor(s)
- Completed Application
- Property questionnaire
- 2 months of bank / financial statements
- Personal Financial Statement
- Credit Authorization
Borrowing Entity
- Articles of Incorporation
- Operating Agreement
- Organization Chart (if any)
Property
- Itemized Soft cost spent
- Building Plans
- Contractor info
- Updated Payoff
- Trailing 12 months – Operating statement (Multifamily)
- Tax statements and current assessments
- Survey
- 12 months Pro-forma
- Construction / Rehab timeline
- Insurance policy and contact info
- Any residential lease agreements
- Any commercial lease agreements including their insurance policies
Property Types
- Retail + Tenant Improvement
- Big Box Retail
- Grocery
- Pharmacy
- Warehouse
- Multifamily
- Industrial
- Office
- Mixed Use
- Farm Industry Supply
- Storage Facilities
- Hospitality
- Medical
FAQs
Are Commercial Bridge Loans Interest Only?
Yes, almost all commercial bridge loans are monthly interest-only payments.
Can Interest Reserve be Added to the Commercial Bridge Loan?
Yes, Interest Reserve can be added up to the full term of the loan, and each monthly interest-only payment can be detected from the reserve so you can focus on the project itself. However, you have to be aware it does not exceed your loan-to-cost (LTV) or loan-to-cost (LTC).
What is a Bridge Loan in Commercial Real Estate?
Bridge loans are short-term interim loans to either help you purchase or refinance a commercial real estate property that otherwise would not qualify for financing with a traditional commercial loan (long-term loan).
Unlike traditional types of loans, bridge loans or bridge lenders understand that the property is not fully stabilized and will work with the borrowing investor and help them financially to get stabilized so they can refinance to a traditional long-term commercial loan.
Bridge loans are essential to real estate investors that know how to turn a rock into a diamond and the benefits of securing less restrictive and quicker financing on a short-term basis despite the higher cost of capital far outweigh the benefits of turning that “C”-class property into an “A” or “B”-class property. With this comes the great responsibility of the real estate investor to fulfill the execution of its plans and timeline to “Cross that Bridge”.
What is a Commercial Bridge Loan Used For?
Commercial bridge loans are interim financing used to purchase commercial property. They are typically used when a borrower is unable to get traditional financing, or when they need to close on a non-stabilized and even stabilized property quickly. The loan is secured by the property itself, which serves as collateral for the loan and in some cases cross-collateralized with other property to minimize the heavy exposure.
Bridge loans are typically used for a period of six months to three years, after which the borrower must either refinance the loan or pay it off in full before that maturity date. Commercial bridge lenders typically charge higher interest rates than traditional lenders, due to the higher risk involved. However, commercial bridge loans are a tool for borrowers who are unable to obtain financing from traditional sources but the plans of the investor for that property are worth their investment.
Commercial bridge loans can be used for a variety of purposes, including:
- Purchasing a new property before the sale of an existing property
- Refinancing an existing loan with more favorable terms
- Renovating or repairing a commercial property (Value Add)
- Funding the construction of a new commercial property
How Can You Qualify for a Commercial Bridge Loan?
Although a commercial bridge loan has fewer conditions than a traditional commercial long-term loan, you will still need to convince the lender you are the right applicant.
- Document how your property will be in a better situation before your bridge loan matures.
- Document how your property will qualify for a traditional commercial loan after your bridge loan.
- Document how your credit history supports the image of a stable investor and will not have issues refinancing into a traditional long-term commercial loan.
- Verify that you have a strong personal financial statement with able liquidity.
- Having enough equity in the deal or property.
- Document your knowledge and how exactly you will get from one side of the bridge to the other end.
Commercial bridge loans are a great option for borrowers who have a strong real estate track record, are financially solid, and are in good credit standings. If you meet the minimum requirements set by the DSCR lender, you may be able to qualify for a commercial bridge loan. However, it’s important to remember that commercial bridge loans are a tool for short-term financing, and they should only be used for that purpose.
What FICO Score Do You Need for a Commercial Bridge Loan?
There is no minimum set FICO score required to qualify for most commercial bridge loans. However, some specially formulated loan programs may set minimum fico scores for that cookie cutter program. When in doubt, the higher your credit scores, the better your chances of securing funding. However, with commercial bridge loans, a strong mitigating factor can negate your low FICO or credit history.
