Commercial Swing or Bridge Loans
In commercial loan transactions, a swing or bridge loan (also known as an interim loan) is a short term loan typically from 3 months to 1 year made against the equity in the borrower’s property or in the case of a blanket encumbrance, multiple properties. These loans are usually predicated on the fact that the borrower will be selling the property or will be using the proceeds of the loan to purchase another property.
Bridge Loans are designed to “bridge” the time period between immediate financing needs and the procurement of permanent financing. Bridge loans have higher interest rates and brief loan durations because these loans are usually based on the equity in the real estate versus qualifying the borrower as done in a conventional loan application. Thus they are inherently riskier to an investor. Most bridge loans take 2-3 weeks to fund. They are specifically made for short time periods. What are the reasons a commercial property owner would seek short term bridge financing?
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Many commercial real estate owners are also business owners. They may need immediate financing to underwrite a new property acquisition, renovate an existing building, or initiate a new construction to expand their business. Other reasons include the need to meet immediate financial obligations such as payroll, credit payments, and to provide cash flow while awaiting an infusion of capital.
Commercial Bridge Financing is a tool that can accommodate the financial needs of borrowers needing immediate capital. However, it is imperative that the borrower have a strategy in place to pay off the loan in a timely manner and that the loan be prudent for her financial well-being.
