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!