A Guide to Bridge Loans and SBA Financing

A Guide to Bridge Loans and SBA Financing

A bridge loan is a short-term loan that is used until permanent financing is obtained. People typically use these loans when they are looking to hire a contractor like DePalma Roofing. These loans are for short-term use, which is generally for up to one-year, and often have higher interest rates. Hare moneylenders require collateral to back these loans, such as inventory or mortgage-free real estate. Bridge loans are also referred to as “gap financing,” “swing loans” or “interim financing.”

Loans and SBA Financing

Bridge Loan Basics

A bridge loan simply means that a company or individual requires a loan to “bridge” financing between real estate transactions. For example, if a company is waiting for a commercial building to close in six months, but needs to purchase another building, but lacks the necessary cash funds to do so, they obtain a bridge loan. These types of loans are very common in real estate, especially since there is often several months between closing on the same property and purchasing another. This allows business owners and homeowners more flexibility when pursuing their options.

In short, a bridge loan is a temporary loan that simply bridges the gap between the sales price of a new commercial property or home and a buyer’s new mortgage, if the property or home has not sold. A bridge loan is secured to the buyer’s existing property or home. Once the property or home closes, the funds from the bridge loan then apply to the down payment on the new property or home.

Some traditional banks allow buyers to qualify for bridge loans, while others make buyers pass through substantial red tape, which delays the sale and purchase of existing properties and homes. Traditional loans also put restrictions on the duration of bridge loans, which can generally range from one to 12 weeks.

SBA Bridge Loan

A SBA (Small Business Administration) bridge loan is excellent for businesses that are looking to purchase commercial real estate. When purchasing raw land, a down payment or Earnest Money, is required to secure the property with a Purchase and Sales Agreement. This is well before the loan application process begins and the loan funds come through. When short-term cash is required for funding shortfalls – especially before loan funds are available – bridge loans make logical sense.

SBA bridge loans are available through both alternative and commercial lenders. These loans are government backed, which means there are also guidelines in place stating how these funds are received and how the money is used once real estate projects are funded. To help avoid lenders’ risks, SBA loans do not fund directly to small businesses or owners. SBA bridge loans fund via an intermediate lender, which helps decrease the likelihood of loan request denials.

These types of loans help small businesses improve and expand in local economies, helping keep the real estate market afloat, while also keeping businesses intact and growing. SBA bridge loans are a superb way to help cover short-term capital needs while waiting for properties of houses to sell and traditional loans to fund. When traditional loans come through, the first monetary paybacks are bridge loans, in addition to any points incurred or interest accrued. The remaining amounts pay off mortgages and any profits that are available for other purposes, such as down payments, etc.

Bridge loans offer interim funding when cash is unavailable. These monetary shortfalls can easily damage, if not close, businesses, which ultimately hurts local economies.

business loans

Veteran Business Loans

Military veterans who want to start their own business can receive special one-on-one assistance from the Veteran’s Association (VA). VA-approved lenders understand the detailed loan process and can help business owners in many different ways, not just with obtaining a loan.

VA’s counseling services also provide assistance about how to effectively manage and guide businesses through economic downtimes. Additionally, they offer emergency loans to veteran-owned businesses on a case-by-case basis.  If military owners or employees are called into military duty, there are loan programs to help minimize the monetary impact this may have on businesses.

These types of business loans are ideal for veterans that have entrepreneurial ambitions or own a business and require additional emergency capital. American veterans employ more than six million people and one in 10 small businesses is veteran owned or run. In fact, veteran owned businesses are responsible for more than $1 trillion in annual sales and earnings, making them a significant part of America’s economic growth.

Small business Veteran financing also works with small business grants, awards, contests and SBA loans for Veteran entrepreneurs. There are several mentoring programs for Veterans.

  • American Corporate Partners (ACP) – This program helps military members transition into the business world. ACP specializes in matching veteran entrepreneurs with mentors that share the same business and personal interests. This is a 12-month mentoring program.
  • Bunker Labs – This program helps veteran-owned companies launch their startups and accelerate their business plans.
  • Entrepreneurship Bootcamp for Veterans with Disabilities (EBV) – This helps veterans launch and grow their businesses by teaching them to leverage the skills they learned in the military and successfully apply them to business ownership.

Small business loans help small businesses grow their businesses, helping make companies worthwhile future investments.

For more information, visit My Hard Money Loans or My Business Credit Lines.