By Devorah Benarroch
A bridge loan is a type of short-term loan typically taken out for a period of 6 months to 3 years depending on the arrangement of larger or longer-term financing options. A bridge loan is interim financing for a business until the next stage of financing can be qualified. Money from the new financing is generally used to pay back the bridge loan.
Bridge loans are typically more expensive than conventional financing, in order to compensate for the additional risk. Bridge loans typically also have a higher interest rate—they use points also known as fees, (1 point equals 1% of loan amount)—and other costs that are amortized over a shorter period of time. Bridge loans are mostly sought after because they are typically arranged very quickly with relatively basic documentation.
Within a two-week period, a bridge loan lender like Century Capital Partners can examine a deal, analyze the properties involved, qualify the buyer, and close on the loan. The company charges fees plus interest. Some lenders will look to private investors who can provide the capital in exchange for the interest. Depending on the type of loan, investors can be paid interest in a lump sum when their principal is returned at the end of the loan term, or they can receive regular monthly payments.
Bridge loans and other hard money loans can be a fast way to investment when there is no time for the banking process in order to secure an immediate business transaction. Previously, these loans were offered by mortgage brokerages and even some banks for years, but now it's shifted to private individuals to “be the bank” in helping qualified borrowers. The key is finding a reliable private lender like Century Capital Partners to guide you through the process.
Century Capital’s bridge loan services offer commercial real estate investors the opportunity to leverage short-term financing benefits without compromising their long-term ROI, making your property’s financial transition seamless.
Note: Bridge loans can even be paid back early with no prepayment penalty; plus all points are paid at closing.