Commercial Bridge Loans
Commercial Bridge Loans are short-term (usually one to three years) loans advanced to cover the period between the termination of one loan and the start of another. For Chicago Commercial Real Estate Investors a Bridge loan can be used as a purchase loan, a Chicago fix and flip loan, or refinance loan - such as a multi-family property that is not stablized).
Chicago Bridge loans are arranged for two basic reasons. First for short term Real Estate Investors looking to sell the property once the value has been increased. Secondly to long term Real Estate investors who complete rehab and get property fully leased to allow the property (or even the borrower) to qualify for permanent financing.
Bridge Loan Qualifications
The qualifications for Commercial bridge loans vary but they generally require a lower loan to value than permanent financing plus a strong guarantor. General requirements for commercial real estate funding are three things:
They are: Cash Flow (Debt Service Coverage), Collateral (Loan To Value & Property Type) and Credit (sponsor credit and experience).
- Cash Flow: For Commercial Real Estate Financing most lenders require a Debt Service Coverage Ratio of 1.2% or better. Chicago Bridge Loans generally does not meet this requirement because the property is either not rehabbed or not fully rented. To compensate the lenders require stronger collateral and / or credit better credit.
- Collateral: For Bridge Loans the lenders offer lower loan to values to mitigate the risk of a property that does not cash flow.
- Credit: There are some bridge lenders that will lend solely on collateral. Most require the a minimum credit score. The higher the credit and experience requirements the lower the rate and sometimes a higher LTV. Therefore the strength of the sponsor is rewarded.
FBC Funding Bridge Loans
As a Chicago Commercial Mortgage Broker we offer Bridge Loans in Chicago and nationwide. Many Lenders term their Bridge loans by other names, like Asset Based Loan, Hard Money, Private Money and even Gap Funding. Each of these terms mean something specific but they are all Bridge loans. The advantage of working with FBC Funding is our wide variety of commercial bridge loan programs we can provide to a Real Estate Investor and find the best program for their needs.