Know the Difference Between Commercial Bridge Loans & Hard Money

Many commercial real estates (CRE) investors go to commercial loan lenders to seek alternative financing—most notably, hard money loans and commercial bridge loans. Both options are good for particular scenarios, so it’s important to find out what they are, how they are acquired, who is qualified, where you can get them, and their differences.

About Commercial Bridge Loans

Commercial bridge loans are also called ‘bridging loans,’ ‘swing loans,’ or ‘caveat loans.’ The money from this type of loan is essentially used to ‘bridge’ or tide over a project until the next financing stage can be obtained. When the new financing is ready, it can be utilized to pay the commercial bridge loan and the other incurred expenses.

Commercial bridge loans are often used for these purposes:

  • Repossessing real estate property after foreclosure
  • Buying commercial real estate
  • Buying cars or other things as long as there is the intention to repay the loan over several months
  • Securing financing with a longer-term

Many CRE investors turn to commercial bridge loans for immediate financing. As you probably already know, traditional loans from traditional lenders like banks take a lot of time to get approved and released. A bridge loan can provide you the money you need right away while you wait for conventional financing.

Commercial bridge loans might make sense if you want to add value to your existing commercial property or make repairs on it. They may also be used to roll a mortgage on a new commercial property as you wait for the current property to sell, and to finish an under-construction project that may have exhausted its financing.

A conventional loan from a bank takes around 45 days on average and involves a lot of paperwork. All this waiting can cause problems in commercial real estate investing, especially in a highly competitive market. The good news is that it’s possible to secure bridge loans quickly with the right provider 

Hard Money Loans

Hard money loans are asset-based loans with higher interest rates. The value of the collateral property secures it. Based on the name, you can already discern that borrowers often consider these loans in a dire financial situation. They may have fallen behind their current mortgage, or they might be facing foreclosure or bankruptcy. Hard money loans let them borrow the funding they need even if they have a bad credit score. They can also borrow even if they cannot document their income.

In hard money loans, lenders usually bypass the borrower’s credit score as long as the property (the collateral) is sufficient to cover the interest rates and balance. With the collateral, the lender is assured of regaining any losses if the borrower is unable to pay the loan.

Hard money loans can be sound alternatives to conventional mortgage lenders and banks when time is of the essence. That’s because hard money lenders act faster compared to average banks. It is possible to close the loan in less than a week, and you can quickly use the money for construction and renovation projects. It might also make sense if:

  • A bank turned you down
  • You want to avoid a foreclosure
  • You want the loan to be approved quickly
  • You do not have enough loan documentation
  • You are looking at debt restructuring.

Similarities between the loans

Commercial bridge loans and hard money loans share many similarities, including the following:

  • The same collateral – Both hard money and commercial bridge loans are based solely on the property’s value without considering a borrower’s credit. This means that turnaround time is quicker for both of them.
  • Short-term – They are ideal for quick projects, like rehabilitation, renovations, or when you plan to refinance or resell the property.
  • Flexible repayment – Both loans can be structured to fit your circumstances and the lender’s standards. They do not have pre-payment penalties, and they allow interest-only payments until most of the loan is due. Because of this flexibility, though, the interest rates that come with these loans are higher than those of conventional loans.

Differences

Hard money loans mostly come from private lenders, while private lenders and traditional banks provide commercial bridge loans.

It’s always wise to ask the bank if they can consider your request for a bridge loan before taking out a hard money loan from a private lender. Bank interest rates are often lower than hard money loan rates.

That said, it never hurts to have a good relationship with a reputable hard money lender, so you always have a source of funding ready should you need money right away to take advantage of an opportunity. 

Which loan is best for your situation?

Both commercial bridge loans and hard money can help borrowers and investors, but they need to come from the right commercial loan lender—one that is professional and trustworthy. If you consider these loans, keep in mind that your decision on which loan to get should be based on your capacity to pay and your needs.

You might also want to discuss your needs with an established and reputable investment advisory firm specializing in providing custom commercial real estate lending solutions to commercial real estate investors. They may be unable to borrow through traditional banks. 

Get in touch with Capital Investors Direct.

We are a full-service commercial real estate investment advisory firm that works with commercial real estate investors in the US to deliver private hard money loans. When you need money urgently, we can help you close a loan quickly. We can also provide you with the asset-based loans you need, whether your asset is located in a suburban or an urban area. We support commercial property investments in all 50 US states and territories, including US Virgin Islands and Puerto Rico, in the top 200 MSA Tier I and Tier II cities with populations above 50,000 and metropolitan areas.

Capital Investors Direct has extensive experience securing bridge loans for large developmental projects, condo conversions, mixed-use properties, multi-family properties, and commercial properties. We have also helped investors with their hard money to fund office spaces, retail establishments, apartment complexes, strip malls, condominium complexes, mobile home parks, industrial properties, shopping complexes, industrial, restaurants and hospitality establishments, and student housing.

We use a unique asset-based underwriting process to secure hard money loans in as fast as ten days. Our hard money loans are suitable for all kinds of commercial real estate, such as retail centers, mixed-use buildings, self-storage facilities, and industrial buildings. Closing time is from five to 10 days, and the loan size is from $1M to $5M.

Should you need a commercial bridge loan, we can help you acquire financing for assets like offices, retail, mixed-use buildings, and multi-family properties, with terms at 12, 18, and 24 months. The size of the loan ranges from $100,000 to $5M or more. Same day approval is possible, and the loan closes in as early as four days, where Jumbo Bridge loans in as little as eight days. We have experience securing bridge loans for cash-out, ground-up construction, rehabilitation, bridge to construction, and partnership buyout. 

Why choose us?

Capital Investors Direct listens to you and goes above and beyond to provide what you expect. We apply our years of detailed insights, market knowledge, and expertise to guide you into choosing the best commercial property financing product. Our team has expertise in unique areas like commercial bridge loans and hard money, so you count on us to ensure the best service and results with efficient and reliable communication.

Apply for the loan you need through Capital Investors Direct by filling up the form on our website, and we’ll contact you within 24 hours for approval and written disclosure of the terms of the loan. Within days, the loan should be credited to your account.

 

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