What is Bridge Debt Financing and Is It Right For You?

Learn more about bridge loans and consider the pros and cons associated with this short-term financing option.

If you’re interested in purchasing an investment property you are probably considering a variety of funding methods. If you’re looking for an option with substantial flexibility then bridge debt financing may be exactly what you’re searching for.

What Is Bridge Debt Financing?

Bridge debt financing offers short-term loans to help finance a project until the borrower obtains permanent funds. Due to the fact that these loans are short-term they may also require subsequent funding to support the costs associated with the repositioning of the property. Another factor to consider is that bridge loans often have higher interest rates than loans with longer, or permanent terms. This is because bridge debt provides virtually immediate funding to the purchaser with a good deal of flexibility, which diminishes any financial burden. While flexible and fast sound very appealing, it is important to note that there are typically fees and penalties associated with late payments, so before committing to a bridge loan be sure your future funding is secure.

When To Consider Using Bridge Debt Financing 

There are a variety of circumstances where bridge loans, and taking on a higher interest rate, make sense. For example, if the housing market is piping hot, you might want to consider bridge debt financing. This would allow you to quickly purchase the properties you want with cash without waiting for your other properties to sell.

While bridge debt financing is associated with high interest rates, it provides borrowers with quick, flexible financing making it a great option for anyone who finds themselves in need of alternative funding. Consider the pros and cons before moving forward and evaluate how they affect your particular situation.

Pros of Bridge Debt Financing 

  • Provides access to immediate capital
  • Flexible terms
  • Alleviate financial burdens associated with taking on multiple projects

Cons of Bridge Debt Financing

  • High interest rates
  • Fees and penalties if borrower is unable to pay
  • Requires take-out financing

For more questions on bridge loans and how to get started contact CALCAP today!

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About CALCAP Lending

A division of CALCAP Advisors, CALCAP Lending benefits from the expertise of a seasoned team of professionals with extensive, successful track-records covering a variety of disciplines and leading large, nationally-recognized institutions. A private money direct lender, CALCAP Lending provides short to mid-term financing for property investors and businesses looking to purchase, refinance, renovate, and construct residential or commercial properties.

Lending FAQs

You've got questions, we've got answers.

What is private money lending?

Private money lending is a collateral-based lending strategy that is often associated with shorter terms and more attractive features. A private money loan offers more flexibility than a conventional mortgage or bank loan.

How does a private money loan work?

Private money lenders provide financing using money from private entities. Private money loans often work as bridges to help investors gather funds to achieve their short term real estate goals, but long term, permanent options may also provide.

Why would I choose a private money lender?

There are many advantages to using a private money lender for your real estate investments! Private money lenders can be more lenient when it comes to borrower credit issues, often there are no prepayment penalties, you can leverage your cash to buy multiple properties, and private money loans are quicker when compared with institutional loans.

Can I get prequalified for a loan?

CALCAP has a responsive loan team who are able to prequalify you. Contact a loan specialist at 833.816.5580 to get started.

How long does the lending process take?

Private money lending can be a quick and painless process. From start to finish, 30 days is common, however, turn around times can be as short as 10 business days.

Can I still be approved for a loan if I have bad credit?

Generally yes, we understand that people have temporary financial issues that come up, and we want to work with you to help you rise up financially to a better place. Offsets to credit concerns may include experience as a real estate investor, good cash reserves, and/or larger down payments.

I am a broker or investor, how can I work with CALCAP?

Business is built on relationships. Ours is no different. CALCAP Value and Preferred Partners receive exclusive rates and services. For more details and to submit your application, visit our partners page.

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