A Short-Term Loan From a Private Lender Secured By Real Estate or Collateral

In today’s fast-paced real estate market, things aren’t always as straightforward as they seem. Sometimes it takes longer than expected for properties to sell or for construction to finish on new developments and renovations. Or you may have a short amount of time to purchase a property. In these situations, a commercial mortgage bridge loan may be exactly what you need, but you probably have many questions about what they are, who qualifies for one, and how much you can borrow. Keep reading to find out everything you need to know about commercial mortgage bridge loans and how Titan Funding can help you meet your real estate funding needs.

What Are Commercial Mortgage Bridge Loans?

Commercial bridge loans are short-term loans from private lenders that are secured by commercial real estate or collateral. The property you plan to purchase or refinance is usually the collateral. Considered a type of hard money loan, they provide commercial property owners with access to funds to improve their cash flow. 

Commercial mortgage bridge loans differ from conventional loans because private lenders are not required to follow stringent government lending regulations. Lenders decide their own minimum qualification requirements including minimum credit score and debt-to-income (DTI) ratio requirements. Commercial bridge loans are different in that they require collateral to secure — usually the property you’re buying.  

What Are Commercial Bridge Mortgage Loans Used For?

Generally, commercial mortgage bridge loans are used for real estate-related transactions such as purchasing or investing in property, refinancing a loan for quick cash, or making much-needed improvements and repairs to a commercial property. However, these loans provide a short-term source of capital that serve other business-related purposes including:

  • Helping businesses meet payroll and other payment obligations, including IRS liens.
  • Relocating a business.
  • Opening a new location.
  • Mergers and acquisitions.
  • Launching or expanding a product or service.
  • Buying inventory.
  • improving cash flow.
  • Debt consolidation.

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How Do You Qualify for a Commercial Mortgage Bridge Loan?

While the qualifications for commercial mortgage bridge loans vary among lenders, most lenders look at the following criteria:

  • The property being purchased: Lenders may consider factors such as the location of the property, its condition, its appraised value, and any existing liens.
  • Your financial ability to pay back the loans: Most lenders assess your financial health by looking at several factors including your debt-to-income ratio and your debt-service coverage ratio (DSCR).
  • Your credit history: Lenders may review your credit history for derogatory marks such as bankruptcy and liens, which may suggest you are a risky borrower. However, having a low credit score does not automatically disqualify you from receiving a commercial bridge loan.

What Properties Are Eligible for Commercial Mortgage Bridge Loans?

Several types of properties can be used to secure a commercial mortgage bridge loan. Eligible properties include:

  • Industrial buildings such as those used as manufacturing centers, factories, and storage facilities.
  • Multi-family buildings that contain five or more units within one or more buildings within one community or complex. Multi-family buildings include apartments, condos, duplexes, and attached townhomes.
  • Mixed-use properties that host both commercial and residential use within one building or complex.
  • Retail properties such as storefronts and restaurants where goods or services are sold.
  • Offices space and office buildings.
  • Hospitality buildings such as hotels and lodging properties.

How Much Can You Borrow Under a Commercial Mortgage Bridge Loan?

Commercial mortgage bridge loan amounts can vary from as low as $55,000 to as much as $5 million. Limitations on loan amounts are usually determined by individual lenders, but most lenders will consider the appraised value of the property you’re purchasing and look at the loan-to-value ratio (LTV) or the percentage of your debt relative to the value of the property you want to purchase or refinance. Lenders tend to offer to loan up to 80% of the assessed value of the property.  

What Are the Advantages of Commercial Mortgage Bridge Loans?

Businesses and investors use commercial mortgage bridge loans when they have been denied a conventional loan, require faster access to funding, or are unable to secure funding from other sources. But there are other benefits including:

  • Fast approval process, usually within a few days.
  • Flexible terms and payment options.
  • Interest-only payments.
  • Simpler application process with less documentation required. 

What Are the Disadvantages of Commercial Mortgage Bridge Loans?

As beneficial as commercial mortgage bridge loans are, they may not be right for every business or investor. These types of loans usually carry additional appraisal, loan originator, administrative, and closing cost fees that many borrowers have not accounted for. Other disadvantages to consider are:

  • Higher interest rates and APRs are typically associated with bridge loans.
  • Repayment is required within a short period of time, usually no more than three years.

Commercial mortgage bridge loans are short-term loans that can be helpful in certain real estate and business situations. Depending on your circumstances it can help you meet your business obligations and real estate goals. Speaking with an experienced and knowledgeable commercial mortgage bridge loan specialist is the first step to securing the funding you need.

About Titan Funding 

Located in Boca Raton, Titan Funding is South Florida’s premier private hard money lender specializing in providing investors and borrowers with opportunities to grow their holdings and continue their businesses. Our team of expert loan agents strives to provide exceptional service with:

  • Loan decisions in as little as 48 hours.
  • Funding received in as quickly as four days.
  • Loan amounts from $100,000 to $5 million.

Whether you need a larger commercial building for your growing business or are interested in purchasing another rental property, Titan Funding is your South Florida hard money lender. We offer several loan options to meet your real estate financing needs, including multifamily and fix and flip loans. We will work with you directly to determine the right option based on your unique circumstances. Contact us online, or give us a call at 855-929-1134 to get started with your loan application.

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