What is bridge financing?
Bridge Financing is used for special situations where a project is not ready for permanent financing or the borrower has a short-term approach to the use of the property. Bridge financing takes many forms from interest only with floating rates to fixed rate amortized loans. SPANCEPT can help arranges bridge financing on all product types with both institutional and private money sources.
Homebuyers who already own a home often use the equity in their home for a down payment on a new home. (The equity is the difference between the current value of a property and the loans secured against it.) One way to do this is to sell the existing home first, then buy the new one. Another way is to use bridge financing (also called “swing” or “interim” financing). A bridge loan is a short-term loan that is secured against the property that is being sold. One problem with most bridge loans is that the loan is usually due in six months. Six months may seem like plenty of time to sell a home. But if the market were to change, you could end up owning two homes for longer than you anticipated. So you should make sure that the holder of the bridge loan will grant you an extension if necessary. Years ago a homebuyer bought a new home using bridge financing. She then put her home on the market. She was unable to sell it in time to pay back the bridge loan. In order to avoid foreclosure, she
Bridge Financing is used to maintain liquidity while waiting for an anticipated and reasonably expected inflow of cash, such as when the cash flow from a sale of an asset is expected after the cash outlay for the purchase of another asset. For example, when selling property, the owner may not receive the cash for 90 days, but has already purchased a new property and must pay for it in 30 days. Bridge financing covers the 60 day gap in cash flows. Bridge loans are often used for commercial real estate purchases to quickly close on a property, retrieve real estate from foreclosure, or take advantage of a short-term opportunity in order to secure long term financing.
Bridge financing involves the extension of an interim loan that allows the borrower to maintain financial stability for a short time, in anticipation of finalizing arrangements for a long-term loan. Sometimes referred to as a swing loan, bridge financing is often used in real estate deals, as well as in some business operations. Here is some information on how bridge financing works, as well as a couple of examples of when bridge financing may be desirable. Configured to literally function as a financial bridge between available finances today and what is anticipated to accrue in a short time, the concept of bridge financing allows financial transactions to continue without being placed into a holding pattern while waiting for available funding. Because bridge financing is understood to be a short-term solution, the expectation is that long-term credit will be approved within a matter of weeks or months. As with any type of loan situation, the borrower has to demonstrate a reasonable a
