Nothing is more nerve-wracking than a stalled commercial development project. Whether due to cost overruns, budgetary errors, or other unforeseen circumstances, it’s a heart-stopping moment when the realization sets in that work must be suspended. The project is sure to be a money maker once it’s finished, but how can you get there without a quick injection of capital?
There is no financial product better for addressing a stalled project than a commercial bridge loan. A direct private lender can extend flexible terms to borrowers for these types of loans. With the right team behind them, borrowers can get funding in as little as five days.
“When a project is held up due to lack of resources, it’s easy to hit the panic button, but you don’t have to,” said Kevin Wolfer, CEO of Kennedy Funding. “Commercial bridge loans are an option that can get things back on track and turn a potential disaster into a revenue stream.”
Here’s a look at the basics of commercial bridge loans and how they’re utilized to keep the gears turning.
What is a commercial bridge loan?
Commercial bridge loans are a form of financing that ties eligibility to the property securing the loan, rather than the borrower’s credit score. For developers that have suffered the misfortune of overseeing a stalled project, commercial bridge loans offer a way out.
Commercial bridge loans are based on the value of the property, often including the projected value once the project is completed. This means the barriers for approval are much lower than traditional loans, especially if you have strong financial projections. If you’re developing a desirable retail property that’s sure to attract lessees, for example, you could apply for a commercial bridge loan based on the reasonable future value.
For projects already underway but which have stalled, there is often a good amount of work completed toward that future value. These types of projects are great candidates for a bridge loan, because lenders can see the added value to the property and the final, fully-redeveloped state just on the horizon.
What are some common use cases for commercial bridge loans?
• Time-sensitive funding: If you need financing quickly to keep a project going, a conventional lender such as a bank won’t do. The approval process for conventional loans could take weeks or months, while an experienced lending team can get a commercial bridge loan approved in days if the circumstances are right. For stalled projects that have run into cash flow issues, this is a great way to avoid losing precious construction time.
• Insufficient credit: If borrowers have insufficient credit to get a much-needed loan to get a project going again, commercial bridge loans from a direct private lender could serve as an alternative way to obtain financing. While private lenders have their own requirements, they are often more flexible than banks, and since commercial bridge loans are based on the future expected value of the property under development, credit is not a major factor.
• Budget overruns: Whether a project ended up costing more than expected or required more materials than planned, a commercial bridge loan can help meet the additional needs on the fly and get things up and running again quickly. While budget overruns typically mean liquidity is a problem, bridge loans are secured by the redeveloped property’s value, so they can be approved quickly and used to secure the rest of the materials and labor needed to finish the job.
Each of these situations is a common reason that work on a commercial real estate project might grind to a halt. Luckily, commercial bridge loans offer a solution in each scenario. Banks and other conventional lenders do offer commercial bridge loans, but your best bet for getting a stalled project back on track is working with a direct private lender like Kennedy Funding.
Why partner with a direct private lender?
Unlike banks which are forced to operate within a strict set of rules, direct private lenders are free to see the same vision that you see: a future commercial development that generates income for years to come. As a result, they make great partners for ambitious projects that conventional lenders will reflexively turn away due to their risk-adverse nature.
To ensure your commercial bridge loan is approved as quickly and seamlessly as possible, it’s important to choose an experienced team. When it comes to commercial bridge loans, few are as experienced as Kennedy Funding. The sooner your project is funded, the sooner you can start making money, and Kennedy can help get the job done.