Applying for Your First Bridge Loan

No matter what kind of business you run, cash flow issues can be a problem from time to time. Whether it is a short-term demand downturn, the costs of important investments and upgrades, or just operating cash to wait out invoice payments, bridge loans offer a versatile option that works for any business or investor with real estate. These short-term loans can even be used to finance property acquisitions, which makes them very popular with property flippers. They are also used for operational budgets by large institutions and for a lot of other purposes by all sorts of companies in between.

1. Gather Your Information and Get Organized

Bridge loans revolve around a few concrete points of information, not an exhaustive business plan with a lot of projections and estimates. You need the relevant information about your collateral property that allows it to be valued, including any other debt owed that could affect the available equity in the real estate. You also need to verify your income with bank statements, tax returns, or other relevant proof. For specifics related to individual programs, consult the lender’s guidelines.

2. Tailor Your Application to the Lender

While there are a lot of similarities from one bridge loan program to the next, there are still significant differences too. Some lenders focus on loans for house flippers primarily, which tends to mean higher LTVs and shorter terms. Those that emphasize working capital for businesses have lower LTVs and terms out of around 36 months. Look for the specific program that suits you, then presents them with exactly the information they are looking for. That might mean changing your presentation for the same basic info from one application to the next if lenders have different formatting demands or forms.

3. Be Responsive During Negotiations

Closing any real estate loan is a complex process, so when loans are designed to approve and close quickly, you can lose a lot of time in waiting. If you respond promptly to requests for new information or signatures on the right paperwork, you can streamline your time to close and get your hands on capital faster. For those using these loans to acquire properties, that timing can make a huge difference because it lets you put together fast deals in a very competitive market.

Bridge loans are relatively easy to get with the right income and collateral, but you do pay for the convenience compared to long-term loans like commercial mortgages. That is why they are often used as staging loans, allowing you to make key renovations to improve a property’s value before refinancing into a long-term instrument.