What is ‘Bridge Loan’…. Many people often hear the term Bridge loan and are not sure what it exactly means. Hopefully after reading this, the mystery will be uncovered and you will know how one can help you.
A bridge loan is a short-term loan used until a person or company secures permanent financing or removes an existing obligation. This type of financing allows the user to meet current obligations by providing immediate cash flow. The loans are short term, up to one year, with relatively high interest rates (unless you borrow with Summit Capital) and are usually backed by some form of collateral such as real estate or inventory.
Bridge loans, also known as interim financing, gap financing or swing loans, “bridge the gap” during times when financing is needed but is not yet available. Both corporations and individuals use bridge loans, and lenders can customize these loans for many different situations.
Businesses turn to bridge loans when they are waiting for long-term financing and need money to cover expenses in the interim. For example, imagine a company is doing a round of equity financing expected to close in six months. It may opt to use a bridge loan to provide working capital to cover its payroll, rent, utilities, inventory costs and other expenses until the round of funding goes through. Maybe a more applicable example would be that a borrower has a property lined up with “back end” or “more traditional bank financing” but needs to purchase it quickly before the bank can act in order to keep the deal together. In that instance the borrower could, should, would come to Summit Capital to let us provide the bridge loan financing.
Summit Capital offers bridge lenders commercial real estate loans in Massachusetts and Rhode Island. Give us a call today to discuss bridge loans in more detail or better yet, give us a try on your next deal! We are a local family owned, direct lender proudly serving all of MA and RI, from Boston to Providence and every town in between.