What is a Bridge Loan?
In general terms, a bridge loan is a loan that covers costs for an individual or a business that has a temporary financial obligation or liability until they’ve either resolved the fiscal commitment or found a more permanent source of funding
An example we often help our clients with is covering the costs of a real estate purchase while a sale of another property is in progress.
These loans are backed by collateral (in the above example, the as yet unsold house) and have a higher interest rate than a conventional loan, given their short-term nature and the convenience that they offer. Typically, terms for a bridge loan allow for a loan term of up to 12 months. Other institutions may refer to these loans as interim financing, gap financing, or swing loans. Regardless of the name used, bridge loans “bridge” the fiscal gap when financing is needed but not available for some reason.
Ideally, a bridge loan is less of a crucial financial loan and more a source of peace of mind and a safety net while sales, deals, or other significant fiscal transactions are underway. These loans are simply meant to buoy your financial situation until a permanent fix can be implemented.
Why Use a Bridge Loan?
Bridge loans are also great for flipping houses. This is the most common reason an individual might want a bridge loan.
However, bridge loans are commonly used in various situations, especially business transactions. Bridge loans can save a company from needing to pass up opportunities because all their capital is tied up in inventory, renovations, or other investments in their future income. Bridge loans can also help secure a company’s financial situation while awaiting a more long-term funding source, such as a round of equity financing that won’t close for several more months.
Getting a Bridge Loan With Bridgepoint Capital
At Bridgepoint, we most often use bridge loans when we’re working with property investors who want to purchase, renovate and resell a house. Flipping houses is uniquely suited to the terms of a bridge loan. We’ve worked successfully with many investors who focus on flipping houses since we started offering bridge loans in 2018.
If this seems like the right type of loan for you, [reach out to us today[Contact us link]] to discuss your situation!
If these numbers look good to you and the project makes sense, we will send you a Term Sheet with firm numbers and summarizing the agreement. We’ll gather basic documentation and guide you through the process. We can secure your loan in as little as 1 week, depending on the type of loan you need, and we will be upfront about the terms and process from the beginning.
If you’re not sure what the best way to fund your project or investment is, we are available for consultations. Reach out to us on the phone or by email to learn more about the opportunities Bridgepoint Capital can help you with.