Finding the Best Bridge Loans

Bridge loans provide short-term financing for individual and business borrowers.  A bridge is a short-term device used to finance an activity such as building a home or a business project investment while a next stage or secondary source of funding is being secured.  The loan is collateralized by the proceeds of the next loan or funding source.

About Bridge Loans

Bridge loans typically have a higher loan interest rate than a traditional loan because of the risk that the second source of funding may fall through.  Finding the best bridge loan should be based on the interest rate being charged, as a percentage above either the London Interbank Offered Rate (LIBOR) or prime interest rate.  Bridge loans can be as high as 15 percent with a short-term of up to 12 months.  Finding a bridge loan with a lower interest rate would be to the advantage of the borrower. The best bridge loan should also have a loan-to-value (LTV) ratio of less than 65 percent for a business and 80 percent for a home loan.  

Finding a Bridge Loan Lender

Comparing rates, terms, and looking at multiple lenders that offer bridge loans should help provide a borrower with the best possible offer. A good financial advisor or commercial lender may provide sources for bridge loans or be able to match the borrower’s needs with a lender’s requirements.

 


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