Commercial Bridge Loan Seekers, Here are 5 Watch
Outs With Commercial Bridge Financing
By: Ron Stone,
For many commercial real estate owners or buyers, the banks are
pretty much ignoring their needs. And why not? They get really cheap
(near zero interest rate) money from the Federal Reserve that they
can buy U.S. Treasuries and pocket a nice spread with no risk.
As a result, a huge number of these business people are having to
get a commercial bridge loan on their commercial property to tide
them over a few years until commercial credit is freed up or until they
sell their property. And while these loans are not cheap, they can
mean the difference in hanging on to their property and losing it.
However, there are some conditions for these loans or mortgages
that a prospective borrower needs to be wary of. Here are 5 critical
watch outs you need to be aware of.
1. Prepayment penalties – A business borrower needs to try and
avoid a loan with a prepayment penalty as just like with the sub
prime implosion, these penalties can wreak havoc with your
future refinance or sales plans. Not having a prepayment
penalty gives you a lot more flexibility.
2. Loan term – Commercial borrowers need to be sure the term is
long enough to get them to the next phase whether it be a
refinance or sale. Too short a term can get you right back into
hot water. If you avoid a prepayment penalty, there is no
downside to a longer than needed term as kind of insurance.
3. Borrowing too little – You need to be sure you borrow enough to
cover those little (or big) surprises. Again as in number two
Commercial Bridge Loan Seekers, 5 Watch Outs For Commercial Bridge Financing
© U.S. Funding Solutions, Inc.
above, it’s just good insurance particularly in these uncertain
4. Borrowing too much – Yes, I know I just warned against
borrowing too little but you can easily go overboard