A Hard Money Bridge Loan is a Quick But Temporary Loan Solution

Hard Money Bridge Loan

A hard money bridge loan on commercial property is a short-term loan with a maturity period from two weeks to three years. The loan is typically used to "bridge the gap" prior to reaching longer-term financing arrangements with another financial institution. A hard money bridge loan is vital for a commercial property investor that needs to close on a property quickly or grab up properties that have gone into foreclosure. These loans are often needed by property developers that need to continue with a project while waiting for other aspects of the project to fall into place such as waiting for project revisions or legal permits to be approved.

A hard money bridge loan is issued by a private company or investor and it comes with a high interest rate due to the short-term nature of the loan. A low interest on a hard money bridge loan may be difficult to find due to the fact that usually no qualifying is required. Plenty of lenders offer hard money bridge loans for commercial purposes including retail, residential apartment complexes, offices, industrial and a variety of other commercial property types. Borrowers need to have an "exit strategy" in mind before obtaining a hard money bridge loan because refinancing in the near future is of the utmost importance.

Use a Hard Money Bridge Loan Mortgage Broker 

Try to find a good deal by enlisting the help of a mortgage broker who may be able to track down the best deal on interest rates as an experienced hard money bridge loan broker will have the best programs for most commercial property types and situations.

Look for mortgage broker who works with private lenders that control their own interest rates and who are more likely to offer a hard money bridge loan. These broker usually have a long term relationship with their lenders and  are more apt to pass on interest savings to the borrower. Keep in mind that most lenders will have a minimum loan amount, sometimes starting as high as one million dollars.

One of the problems with a hard money bridge loan is that the interest rates are constantly changing. Since this type of loan is needed on a spur of the moment basis, it can be impossible to predict the interest rate that you will end up paying until you actually apply for the loan.

Most lenders will analyze your financial needs and give you their current interest rates up front, but interest rates will usually be from 10% to 18% and higher on international transactions

Sometimes a lender is willing to waive the hard money bridge loan application fee if the borrower agrees to meet the lender in their corporate offices to show their commitment to the transaction. It may seem like a trivial amount in the grand scheme of things when considering a hard money bridge loan, but not having to pay an application fee is more money in your pocket.

Have an Exit Strategy For Your Hard Money Bridge Loan

Regardless of what your hard money bridge loan interest rate is, refinancing quickly could be the best thing to do as far as saving you money is concerned. Don`t wait until your hard money bridge loan term draws near, because it will come much sooner than later. Have your backup plan in place and start working on procuring that permanent financing the moment the hard money bridge loan funds are in hand.

Since hard money bridge loan lenders loan funds a loan based on the property equity, a borrower`s credit doesn`t have to be perfect. Bumping up that credit score, however, may work in your favor and get you a better interest rate when considering an exit strategy. To find out how much you could end up paying, utilize a mortgage calculator with precise interest rates and terms. This will give you an accurate idea of the payments you can expect.

A hard money bridge loan can be the solution to your immediate need for commercial real estate cash.

Use a Commercial Private Equity Loan

A private equity loan is quickly becoming the loan of choice as the credit crisis is having a major impact in both America and Europe. Most U.S. citizens who are investing or planning to invest in commercial real estate are facing disastrous effects. Even if you have equity in your commercial real estate, a home equity loan is not available for this type of property. Since the bond market has stopped working as a supplier of capital as investment houses, insurance companies and multinational corporations have stopped making loans that can be sold to government and large securitized enterprises. There is basically a shortage of money to lend. Even good loans that can be approved are being turned away. Commercial real estate professionals are desperately scrambling in search of lenders who are willing to lend. As a result of this, borrowers are seeking alternative sources of funding such as private equity loan firms to meet their need for cash.

What are Private Equity Loan Firms?

Private equity loan firms are basically investment companies that have been set up in order to invest the wealth of their sponsors and investors. These are similar to hedge funds in some ways although they are structured in a dissimilar manner. Private equity loan funds are more flexible and creative when it comes to investment policy. Many developers and property owners who have developed a relationship with private equity loan firms enjoy a dependable source of money for their real estate enterprises. There are not many private equity loan companies that will make a private equity loan available to you on your commercial property. Despite this short coming, there are many firms that have a real estate division which are eager to make loans and take equity positions in the better deals that they come across. Most of these firms usually have some amount of proficiency in commercial real estate and likes to deal in mortgage paper.

How Do Private Equity Loan Firms Work?

Private equity loan firms are highly opportunistic entities which seek high returns. The interest rates these firms charge on private equity loans range from 15% to 17% and also tack on several origination points. The reason these loans are popular despite the exorbitant interest rate is because of their availability. Private equity loan companies give you loans based on the amount of equity you have build up on the commercial real estate that you plan to keep as collateral and not depending upon your credit score. Thus even if you have a credit score that is not something to boast about, you would still qualify for an equity based loan from a private equity loan firm. Since a private equity loan firm is protective of its investment capital, a significant amount of equity is demanded for any deal being funded. Very rarely the amount of a private equity loan will exceed 65%-70% of the value of your target property.

Despite its drawbacks, a private equity loan is becoming the loan of choice as it is gaining momentum in a market facing scarcity of cash flow when it comes to commercial property financing.

Making some extra savings, repairing the home or car, buying new brakes or some other such important things might be on your cards. But, tight financing must be playing the spoilsport. So, what can you do in such a situation? One of the greatest options is to lower the debt payments including the mortgage payments. Now, in order to get the mortgage payments lowered, you can either opt for loan modification or home loan refinancing. As for the unsecured debt payments you can save money on that by consolidating the debts. But, most of the homeowners being the owner of the underwater mortgages have been unable to get their mortgages refinanced even through the federal refinancing program.

Bridge loans give you immediate access to cash using equity in your commercial property and enable you to take control of your finances again. However, bridge loans come with a warning! Bridge loans are short term loans that should be used wisely. Once acquired you need to be sure that you can repay your bridge loans as agreed and that you can do so within your current budget! After all, you don’t want to have to take out another bridge loan to pay for your existing bridge loans! Secondly, if you are taking out bridge loans every six months or so (even if you are paying them off regularly) that should be a warning sign that you have a budgeting problem that needs to be addressed. And when you have a budgeting problem, you either need to increase your income or decrease your expenses. That said, bridge loans should be used wisely and only when necessary.

Bridge loans can help with paying annual or once-a-year payments that have come due for which you simply do not have the money for or the ability to pay. This could be a property insurance premium, annual property taxes, or annual life insurance premiums for your employees which could be an immediate need for some additional cash. Unfortunately, paying those business expenses is not optional… especially if you want and need these services! Things happen beyond one's control as it could be a sudden loss of a large anchor tenant or possibly and unexpected capital repair or necessary improvement that can leave you short of cash one month. This can happen at anytime with a business and a commercial property especially in a down economy. Additionally, a business opportunity, business or even property expansion may be warranted and the cash needed quickly. Either way, your solution could be to utilize bridge loans to access that needed cash.

Bridge loans may be just what you need to access capital if you are having trouble making ends meet. Bridge loans help you to “bridge the gap” between your business expenses and business income. Bridge loans are not long term solutions, but they are an excellent short term solution to your money problems. If for some reason your business income has been eclipsed by your expenses, you may need to borrow money to pay for those additional expenses until your business income is stabilized. Bridge loans can be the answer to your cash flow dilemma.

Short Term Commercial Bridge Loans Free Up Cash Quickly

Make sure that you are in control of your business expenses and obligations by accessing capital from short term commercial bridge loans, then pay back the commercial bridge loans over time. Be sure to have a defined plan of action and a clear exit strategy. No one wants to conduct their business without sufficient capital for day to day operations and additional reserves. There’s no need to be hit hard by unexpected budget short falls due to a weakeconomy and a loss of business income. If that’s the case, you can simply apply for commercial bridge loans using equity in your property located in the United States or the Caribbean as your solution!

Commercial bridge loans can allow you to take control of your finances again. But it comes with a warning! Short term commercial bridge loans are just that – short term. Once acquired you need to be sure that you can repay your commercial bridge loans as agreed and that they are within your current budget! After all, You don’t want to have to take out additional commercial bridge loans to pay for your existing commercial bridge loans! Secondly, if you are taking out commercial bridge loans every six months or so (even if you are paying them off regularly) that should be a warning sign that you have a budgeting problem that needs to be addressed. And when you have a budgeting problem, you either need to increase your income or decrease your expenses.  Short term commercial bridge loans should be used wisely and only when necessary.

Short term commercial bridge loans may be just what you need to access capital if you are having trouble making ends meet. Commercial bridge loans help you to “bridge the gap” between your business expenses and income. Commercial bridge loans are not long term solutions, rather commercial bridge loans are an excellent short term solution to your money problems. If for some reason your business income has been eclipsed by your expenses, you may need to borrow money to pay for those additional expenses until your business income is stabilized. Short term commercial bridge loans can be the answer to this dilemma.

Commercial bridge loans can help with paying annual or once-a-year payments that has come due for which you simply do not have the money for or the ability to pay. This could be a property insurance premium, annual property taxes, or annual life insurance premiums for your employees which could be an immediate need for some additional cash. Unfortunately, paying those business expenses is not optional… especially if you want and need these services! Things happen beyond one's control as it could be a sudden loss of a large anchor tenant or possibly and unexpected capital repair or necessary improvement that can leave you short of cash one month. This can happen at anytime with a business and a commercial property especially in a down economy. Sometimes a business opportunity or business or property expansion may be warranted and the cash needed quickly. Either way, your solution could be short term commercial bridge loans to access that cash.

A Bridge Loan Can be Your Solution to Much Needed Funds 
 

A short term commercial bridge loan may be just what you need to access capital if you are having trouble making ends meet. A short term bridge loan helps you to “bridge the gap” between your business expenses and income. A bridge loan is not a long term solution, but it is an excellent short term solution to your money problems. If for some reason your business income has been eclipsed by your expenses, you may need to borrow money to pay for those additional expenses until your business income is stabilized. A short term commercial bridge loan can be the answer to this dilemma.

A bridge loan can help with paying an annual or once-a-year payment that has come due for which you simply do not have the money for or the ability to pay. This could be a property insurance premium, annual property taxes, or annual life insurance premiums for your employees which could be an immediate need for some additional cash. Unfortunately, paying those business expenses is not optional… especially if you want these services! Things happen beyond one's control as it could be a sudden loss of a large anchor tenant or possibly and unexpected capital repair or necessary improvement that can leave you short of cash one month. This can happen at anytime with a business and a commercial property especially in a down economy. Sometimes a business opportunity or business or property expansion may be warranted and the cash needed quickly. Either way, your solution could be a short term bridge loan.

Make sure that you are in control of your business expenses and obligations by accessing capital with a short term bridge loan, then pay back the short term bridge loan over time. Be sure to have a defined plan of action and a clear exit strategy. No one wants to conduct their business without sufficient capital for day to day operations and additional reserves. There’s no need to be hit hard by a weak economy and unexpected budget short falls due to a weak economy and a loss of business income. If that’s the case, you can simply apply for a short term commercial bridge loan in the using your property in the United States or the Caribbean as your solution!

A short term bridge loan can allow you to take control of your finances again. But it comes with a warning! A short term bridge loan is just that – short term. Once acquired you need to be sure that you can repay your short term bridge loan as agreed and within your current budget! You don’t want to have to take out a bridge loan to pay for your bridge loan! Secondly, if you are taking out bridge loans every month or two (even if you are paying them off regularly) that should be a warning sign that you have a budgeting problem that needs to be addressed. And when you have a budgeting problem, you either need to increase your income or decrease your expenses.  A short term bridge loan should be used wisely and only when necessary.

"True" Commercial Hard Money Lending
 

What is commercial hard money lending? 

"True" commercial hard money lending is actually lending based upon a percentage of the value of a tangible asset, mainly commercial property. Over the years there have been many different commercial hard money lending programs. There are commercial hard money lending programs for troubled businesses, possibly in bankruptcy reorganization. There are commercial hard money lending programs for businesses with property that need capital quickly whereby borrowers don’t necessarily concern themselves about the structure of the loan or the repayment terms. There are commercial hard money lending programs that work for commercial property acquisition and cash out refinancing. There are commercial hard money lending programs for development and construction projects and raw land acquisition. But there are also commercial hard money lending programs that are termed "flash cash" which is really short term, one day, transactional funding for commercial property purchases that are considered a type of commercial hard money lending too.

But real, true commercial hard money lending done as it was meant to be done, is purely based upon the asset and its actual value and not based upon the borrower’s personal qualifications. So no matter what your credit score looks like and no matter what you have going on in your personal life, if you you have an actual, tangible commercial property with value and equity then you "qualify" for commercial hard money lending under our investors guidelines. The point to be made is that real commercial hard money lending is based on the value of the property versus assets of the individual. So, as a true commercial hard money lending source we only look the "mechanics" or "nuts and bolts" of the property to make the transaction work. This would be the current "as-is" value, the current balance owed, the completion values of the property (for construction projects) and the amount of the loan requested. That's it… And, and if there is enough value in that property to make the loan "work" then the loan can be made regardless of the borrower’s credit scores or personal situation.

The bottom line is that for commercial hard money lenders it is not about the borrower rather, it's about the property value. It should be further noted that it doesn't matter how much money the borrower brings home each week or what the bank statements say or his adjusted gross income on his tax return. It's not about where he came from, where he lives or even how he lives and it has nothing to do with his past experiences whether successful or failures. It is not about anything other than value of the property. So if you are talking to any commercial hard money lender and they are putting more weight on you as the borrower than the property, you are surely talking to the wrong type of lender because they are definitely not a commercial hard money lending source. Rather, you are really speaking to a regular conventional lender in disguise. The truth is that if someone is concerned about you as the borrower than the commercial property asset then they are not a viable commercial hard money lending source. Hard money lenders only care about the value of the property and that’s it. 

WestshoreMortgage.com has been offering true, commercial hard money loans on US properties since 1993. Since that time we have acquired direct access to several, true, commercial hard money lending sources who only use the value of the collateral for lending purposes. We offer free, initial feasibility reviews to examine the mechanics of the commercial hard money lending request to determine the likelihood of successfully funding your commercial hard money loan. CaribbeanMortgageLoans.com offers commercial hard money lending for commercial properties located in Mexico and the Caribbean.

South Florida Still Feeling the Burn of the Commercial Real Estate Meltdown
 

Although the residential housing market is starting to show signs of recovery, South Florida’s commercial real estate is still in crisis. Peppered with empty storefronts, diminishing rent prices and difficult to obtain credit, a sizable number of South Florida commercial property owners face default on their bank loans. Many fear that this could trigger another round of bank failures and further impede the economic recovery of the region. 

Over the years, South Florida’s community banks have invested in commercial properties such as hotels, shopping centers and office space. According to analysis conducted for the Miami Herald, Florida financial institutions have twice as many commercial loans in their portfolios as out-of-state banks.

A recent example of the commercial real estate crisis is the seizure of Chicago-based Corus Bank by federal regulators. Corus was a major player in South Florida’s commercial real estate market and was undone by heavy lending in construction and commercial real estate.

From Fort Lauderdale to Boca Raton, there are more and more “For Rent” and “For Lease” signs appearing on commercial properties. Many highly desired commercial locations are now sporting vacancies. Local development projects are also under distress and face either cancellation or foreclosure such as the former Grand Bay Hotel in Coconut Grove.

The health of a commercial real estate market often provides a good look at the viability of a local economy. With South Florida employers continuing to lay off workers, more office space goes unused. This causes less people to have less purchasing power, causing retailers to have difficulty just hanging on, let alone opening new stores.

The negative impact of this crisis on South Florida’s overall economy is substantial. Real estate development, both commercial and residential, is one of Florida’s leading industries. This multibillion-dollar industry also supports many residual businesses, including construction, property management, interior design, furniture sales and property appraisers.

Adding to this dilemma is the fact that financing has dried up and few banks in South Florida are willing to refinance maturing bank loans. In the past, Wall Street would provide a significant portion of money for commercial properties by bundling these loans into securities. Due to previous problems in our financial institutions, this is no longer a viable option. One ray of hope in this crisis is that the Treasury Department is trying to boost the mortgage packaging market by encouraging investors to buy new securities by offering attractive new loans.

Only time will tell if this strategy can jump-start South Florida’s floundering commercial real estate market. WestshoreMortgage.com is an experienced commercial real estate financing firm located in Tampa, Florida that specializes in hard to place commercial real estate loans.

Commercial Loan Basics You Should Know
 

The key to successfully obtaining a commercial loan is knowledge. In this article, we conduct an overview of commercial loan financing and basic information one should know when considering commercial financing. 

A commercial loan is simply a loan made for business purposes, rather than individual needs. A mortgage for your home is a personal loan. A mortgage for a new office building for a business is a commercial loan. The primary thing to keep in mind is that an individual is the primary focus of a personal loan while the focus for a commercial loan is either the business or asset to be obtained. For instance, a lender will analyze cash flow, expenses and so on of an income producing property like an apartment building when considering a commercial loan. As the borrower and guarantor your personal credit matters, but not nearly as much as the fundamentals of the property finances.

The first thing to understand about seeking out a commercial loan is familiarity. If you are seeking financing for the construction of a new commercial building for your business, you need to apply with commercial banks that have a history of providing such commercial loan financing. Very few commercial banks are one stop shops. Spending the time, money and effort to place an application with a bank that doesn’t write that type of business or only dabbles in it is a bigger disaster than you probably realize. Why? When they inevitably reject the application, it will be noted on the credit report of the business and yourself, which makes it much tougher to get a loan from a bank that does write that type of business.

Key Factors

There are a number of factors that commercial banks consider when evaluating commercial loan applications. The key thing to understand is they are all a measure of the risk in the project and should be viewed as much. Everything you suggest or offer up should be done so with this in mind.

Cash Flow

The initial consideration is cash flow. This can be calculated per the business or asset being borrowed against. Let’s consider an apartment complex. The fact you think it is a good deal is irrelevant. A commercial lender is going to want to see a property that has a positive cash flow if the loan is given. This means documentation will need to be provided that details the monthly revenue divided by all the expenses, taxes and the mortgage payments. Most banks look for a 1.25 to 1.50 cash flow ratio.

Collateral

Collateral is a much bigger issue with a commercial loan than with a residential loan. This can actually help you. Additionally, you can often use other business assets to "cross collateralize" a commercial loan you are seeking and that the bank might not otherwise give.

Debt to Equity

This is a ratio that represents your total capital assets versus the debts of the business. The bank wants to see a controlled debt situation. If your debts are more than 5 times your capital, it is going to be difficult to get a commercial loan.

Management

Does the management of the business have any previous experience with this type of transaction, business niche and commercial loan? How did it go? Remember, we are talking about risk assessments. A bank is going to be much more comfortable providing a commercial loan to a business with experienced management versus a group doing it for the first time.

What is the best method for successfully applying for a commercial loan? Get experienced help and find a licensed mortgage broker that specializes in commercial real estate loans in the US, Mexico and the Caribbean.  It can make the difference between getting the commercial loan financing you need and watching a project go down the drain. Contact the experienced commercial loan specialists at WestshoreMortgage.com for a free commercial loan feasibility review and consultation.

–Hard Money LTV Ratios – The First Qualifier For Private Commercial Lending. 

Thinking about applying for a private commercial mortgage loan? You should know Hard Money LTV ratios or “Loan-to-Value” ratios lenders use, and what to expect when applying for a commercial hard money loan. 

Keep in mind that private “hard money” commercial lending is equity based lending whereby the lender makes a loan based on a percentage of the property value. Hard money LTV ratios are much lower than in conventional Lending to minimize risk to the lender.

Land – Hard Money LTV Ratios for land is about 50%

Land loans are much more difficult to get funded today than they were just last year. Many lenders who gladly approved land loans in the recent past shun them now. Raw land loans are virtually impossible to get now-a-days, but if you have a piece of commercial property that is zoned and approved for development you can expect to be approved for a loan based on the hard money LTV ratios of about 50%.

Improved Land – Hard Money LTV Ratios for improved land is about 60% 

Improved land is simply land with buildings on it. If the buildings are in decent shape but are vacant or under-performing then hard money LTV ratios in the 60% range is reasonable.

Income Producing Buildings – Hard Money LTV Ratios for income producing properties are about 65%. 

Income producing buildings are the favorite assets of the private commercial mortgage lender. If you own, or are lucky enough to be acquiring a building with positive cash-flow, you should be approved for a loan of about 65% of the property value. Maybe a bit more if you’re looking for a refinance loan.

Construction – Hard Money LTV Ratios for for construction is about 70% 

Private development money is quite hard to come-by in this credit market and if you do find a willing lender, be ready for the fact that most hard money construction loans are written for about 70% of the projects cost. The sponsors (borrowers) are going to have to come up with the other 30%.

Privately funded “hard money” commercial mortgage loans are an indispensable part of commercial real estate lending today. But they don’t call it hard money for nothing. Rates start at 10% and go up fast, broker and lender points will be added to the loan and the hard money LTV ratios are usually lower than the borrower would like. When you need one, however, you’ll be glad hard money lenders are there, ready and willing and able to write checks to quickly fund your hard money loan.

Ray Wateska and Westshore Mortgage & Investments Co., Inc. are Federally registered with the National Mortgage Licensing System (NMLS) and State Licensed through the Florida Office of Financial Regulation (FLOFR). Together, they have been providing commercial hard money loans since 1993. Contact Ray with your questions about hard money LTV ratios for your property or project.