How to Get Eligible for Commercial Real Estate Bridge Loans?

Commercial real estate bridge loans are great short-term financing options for businesses looking to bridge the gap between their immediate need for funds and the availability of long-term loans. In case you are looking to expand, purchase property or equipment, or invest in other business opportunities, we recommend you consider commercial real estate bridge loans.

The difference between these bridge loans and traditional loans is that the former is supposed to be a short-term loan (approximately 6-18 months). Another point that you must keep in mind is that they are riskier than conventional loans, which is why they are a great financing option for risky projects or projects where the outcome is not guaranteed.

Check out the following article to learn more about how you can qualify for commercial real estate bridge loans. We will also mention some pointers that will help you ensure that your real estate project succeeds.

How to become eligible for commercial real estate bridge loans?

1.      Understanding the requirements set by loan lenders

Although these loans have less stringent requirements, the loan lender will surely have specific criteria for borrowers. Some common requirements they might have include: -

a.      Equity Requirements

Whether you qualify for your commercial real estate bridge loan is dependent on the owned property’s existing equity. Typically, bridge loan lenders offer 70% of the current value of the existing property.

You can also apply for a double bridge loan which is useful when borrowers want to pull equity from their existing property, but it won’t be enough to purchase the new property with all cash.

b.      Income Requirements

Most consumer-purpose loans verify the income source of the borrower and ensure that their debt-to-income ratio does not exceed 50%. However, commercial real estate bridge loans are not subject to these regulations, which is why the lender will have other requirements that you must fulfill.

c.       Credit Requirements

Lenders generally prefer borrowers with high credit scores but are generally less concerned about less-than-perfect FICO scores. Since the sale of the current property automatically pays off the bridge loan, lenders are reasonably certain that they can easily recoup the loan amount.

Generally, credit scores of 650 and above are easily approved by lenders, meaning you should target it.

2.      Prepare a comprehensive loan application

Once you know the lender’s requirements, prepare a comprehensive loan application that includes your business plan, expected returns, and the loan repayment plan. We recommend adding financial statements and other related documents that support your loan application.

3.      Consider different collateral options

Collaterals are essential to qualify for commercial real estate bridge loans and can be of different forms like real estate, inventory, accounts receivable, or inventory. You can also use personal assets, but we recommend taking the decision after careful consideration.

Work with experts for your commercial real estate bridge loan

Commercial real estate bridge loans can be a great financing option, but you must ensure that it is appropriate for you. We hope the above article provided you with a good starting point, but if you need expert help, we recommend getting in touch with the expert team at Private Capital Investors.