How to Use Bridge Loans to Fund a Commercial Property

Moving to a new office or renovating your existing business center requires a large amount of funding. Especially when you want to get started right away in doing your enterprise or have a quick renovation of your store or office, a commercial loan will fund it when you lack the money to finance the commercial property purchase or make renovations with it. However, if you need the money as soon as possible, a bridge loan can finance it until you can obtain permanent financing or sell your commercial property.

What are Commercial Bridge Loans?

They are short-term real estate loans designed to finance a commercial property or venture immediately. They are made available to you if you have not qualified for permanent financing, have a lower credit score than required, or wouldn’t want to wait for the processing period when applying for permanent financing.

Commercial bridge loans are made available to you when a commercial property you are purchasing requires significant renovations to make it qualified for permanent financing. They have payment periods ranging from six months to three years, wherein the property is sold or has been approved for permanent financing.

This type of loan is best for those who are looking for an office building to operate their business. Real estate investors can take advantage of this financing scheme as well. The most common reason for bridge loan applications is office or building renovations. If you are preparing your office building to accommodate your production, back office, and other upgrades you wanted to install in your office, commercial bridge loans can finance it for you.

Benefits and Setbacks of Commercial Bridge Loans

The primary benefit of a commercial bridge loan is fast application and approval. The credit score requirement of bridge loans is lower too. It can provide a secure loan in a short period but has a payment term that is enough for you to settle it once the renovations are complete or the office building is sold or qualified for permanent financing.

The setback of commercial bridge loans is its interest. If your business is doing slow and you want to do renovations, this option may not give you any favor. It tends to be risky as well, but it can be managed if the loan amount is equal to loan-to-value or the future value of the building or property. If you have good credit scores and profiles, this could give you leverage to improve your business performance by making the upgrades or adding new features in your office building.

How Bridge Loans work as Finance for your Office Building

Commercial bridge loans can work in two ways: buy or renovate. These two situations can apply to any business and are supported best by bridge loans. It is still needed to get these actions financed by yourself or the company before or during the loan term is finished. Here are some scenarios where commercial bridge loans finance the office purchase or renovation.

You’ve decided to move to a new building to expand your business

This scenario usually applies to growing companies. If you are someone who needs more warehouse space or office area, a new office or building will suit you best. However, building one from the ground up may take some time plus you are paying building leases while constructing it.

The most viable option would be moving into a bigger office. However, financing the move with permanent financing or regular business loans wouldn’t hasten it or put it in place without interrupting business operations. A bridge loan can help with the initial purchase of the property, make the initial renovations, and stabilize business operations in the new office.

You’ve wanted to make significant renovations or upgrades in your office

If you are an office that needs to expand their receiving area, office rooms, or production floors, then you need to do a major overhaul on the office floorplan. It will require thousands of dollars to execute. A commercial loan can help, but it takes time. Especially when your office is receiving more clients, the renovation or upgrade must be done right away. If you have ordered the equipment ahead, it is necessary to have all the wirings installed or risk seeing loose wires and accidents by electrocution.

A bridge loan hastens the job in doing the renovations until you can finance the rest of the changes in your office building. Especially with calamity-related damages, you wouldn’t want to delay the upgrades or risk suspending the operations in your office. Bridge loans are also short-term, which means you don’t have to direct a portion of your business income to the loan for a long time. It can add upgrades or strengthen and beautify your office area to do more businesses.

Do you need to resort to commercial bridge loans?

If the need to move or renovate is necessary and must be done as swiftly as possible, then you would think about getting this loan. Bridge loans can finance your office purchase for move or renovations with your current or new business space. However, if you have qualified for permanent financing, you should not get a bridge loan. Again, it is a high-risk loan with soaring interests and short payment terms, so it is best taken when necessary changes have to be in place, and the regular loan types take long or had not qualified you for a loan.

Are there other ways to finance your office building?

There are lots of loans available for commercial properties. The best way to do it is to talk to a loan specialist or your real estate agent about getting business loans. Other loan agencies offer free quotes, so you can take advantage of it. See if you are capable of handling its terms, and if it is necessary to get one for your office building, whether you’re expanding, planning to move or branch out, or making renovations with it.