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Commercial hard money lenders are an alternative to banks and more traditional lenders when business entities need quick infusions of cash. Learn more about what a commercial bridge loan is, how the loan structure differs from traditional loans, and some of the best times to turn to a commercial bridge loan.

The Importance of a Commercial Bridge Loan

Hard money loans are loans backed by real property. The real estate acts as a form of insurance or collateral or, in the case of hard money loans dealing directly with property, the basis for the loan.

Commercial bridge loans, a specific type of hard money loan, are loans from private money lenders that can be used to either rehabilitate properties or pay off older loans on a commercial property. Business entities can turn to these types of loans when they quickly need money to secure a property or to make business-related improvements to the property. Commercial bridge loans can also be used as a short-term source of capital, or a cash infusion, as the business searches for traditional forms of capital elsewhere. Some of the most common applications for commercial bridge loans include:

  • Meeting payroll obligations.
  • Expanding a product line or opening a new location.
  • Buying out a business partner.
  • Improving a commercial property for refinancing purposes or to sell it entirely.

Bridge loans are available to both small and large businesses to help ensure business operations or forecasted plans proceed smoothly. Businesses or individuals can generally apply for commercial bridge loans for the following types of properties:

  • Industrial buildings, such s manufacturing centers, factories, and storage warehouses.
  • Multi-family buildings, such as apartments, condos, and duplexes, triplexes, or quadplexes.
  • Office and retail spaces.
  • Mixed-use properties that include spaces zoned for both commercial and residential use.

Differences Between Commercial Hard Lending and Traditional Bank Loans

Commercial bridge loans aren’t like traditional business loans through a bank or a mortgage loan through a traditional lender. Instead, they are fast, flexible tools that allow businesses to keep growing based on the holdings the company currently has or anticipates procuring through the loan. Some of the key differences between commercial hard lending and traditional bank loans are:

  • Fast approval processes: Hard money lending for commercial enterprises has been streamlined so businesses receive the capital they need quickly. Instead of the thirty days or even longer it may take for traditional mortgage loan approvals, hard money can be approved within a matter of days. This speed is crucial for every type of business, whether they need to secure funds for product manufacturing, to meet payroll obligations, or to improve a property and secure tenants.
  • Flexible terms: Different business ventures need different amounts of capital, and that amount can change in the middle of an ongoing project such as a property stabilization. Bridge loans are flexible, and businesses can be approved with adjustable terms.
  • Approval metrics: Traditional loans, especially on a property, require a lengthy history of tenant payments and other markers that help guarantee the lender’s money. Banks and other traditional lenders require stringent histories and offer little leeway. But private lenders offering commercial bridge loans are more open to exploring the possibilities of vacant or old properties and income potential when determining whether or not to approve a loan.
  • Basis in real property: Traditional loans are often secured based on the borrower’s credit history. Hard money loans, however, evaluate the borrower’s equity in real estate holdings. As long as the borrower has enough equity in a property, then the lender can comfortably approve a loan relative to that equity. These give flexibility to small businesses that don’t qualify for SBA loans or property holders that have non-qualified properties.

When Should You Consider Applying for a Hard Money Commercial Bridge Loan?

Traditional loans and commercial bridge loans each have their own advantages, but they can’t be used interchangeably. Business owners and commercial entities should consider traditional loans for long-term loans and property purchases they expect to hold onto for years or even decades. However, they should prefer bridge loans under the following circumstances:

  • A real estate buyer needs funds immediately to purchase a property that has just recently been released on the market or which faces heavy competition.
  • A property owner needs funds to start an improvement or construction project while waiting for other sources of equity funding. A bridge loan can ensure the project isn’t interrupted or delayed.
  • Business owners are in the middle of a growth or expansion plan and need capital to cover the costs or short-term losses until the growth gains traction.
  • A real estate investment company is expanding their holdings to include a new property but needs transitional funds to cover renovations, upgrades, and marketing before the first tenants pay rent.
  • A business has been interrupted by a disaster, and the owners need capital for repairs or to continue business while the insurance claim is processed.
  • The business has plenty of properties and equity, but it needs an immediate cash infusion to cover liens and bills.

Different Types of Commercial Hard Money Lending Programs for Real Estate Investors

Just like there are different types of business or personal loans through traditional lenders, there are different types of commercial hard money loans. Some of the most common types of programs include:

  • General commercial loans, which give businesses more flexibility and speed in buying commercial or industrial space.
  • Fix and flip loan programs, which give real estate investors the capital to both purchase a residential or commercial property and make the necessary improvements to put it back on the market for resale. Some lenders separate out multi family bridge loans as a specialized fix and flip loan for larger multi family properties.
  • Bridge loans for refinancing, which property owners can use to improve a property to meet standards held by traditional lenders.

Each of these loan programs and dozens of individual hard money commercial loans can help fuel a business for future growth and sustainability. At Titan Funding, we provide investors and borrowers with opportunities to grow their holdings and continue their businesses. Contact us to learn how we can help your business.

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