In fact, most bridge loans are from private mortgage lenders due to the speed in which they can react to a request for financing, provided that there is equity in real estate that can be leveraged.
Bridge loans are short term financing arrangements that have some form of asset based security in most cases. Assets can range from equipment, inventory, purchase orders, accounts receivable, and real estate.
While other forms of assets can be utilized as security to acquire a bridge loan for a variety of purposes, a private bridge loan against real estate is always going to be preferred if possible for a number of reasons.
First, a private lender can lend up to 85% of fair value of real estate even in a second mortgage security position. The loan to value amounts provided on bridge loans secured by other assets tend to be significantly lower.
Second, even a private 2nd mortgage will only command interest rates in the 9% to 12% range on average where as other forms of asset based bridge loans can command interest rates of 2% to 3% a month making them very expensive sources of capital.
Third, because the determination of value and ownership are easier to establish for real estate, a private bridge loan from a private mortgage lender can be put into place much faster than other forms of bridge financing that require hard security.
In many respects, all private mortgages are actually private bridge loans due to the fact that most private money lenders only provide interest terms of one year making them a very short term form of borrowing.
Another important aspect of private bridge loans is that the use of funds does not typically need to relate to the real estate offered as security.
For instance, a business may have a need to secure inventory for up coming sales orders and wants to leverage the equity in a commercial property to acquire the necessary capital. The resulting private bridge loan would provide the funds necessary to get the inventory in place that is required to complete the order and when the sales margin is earned, the bridge financing could then be repaid.
If you’re in need of a private bridge loan, I suggest that you give me a call right away and I’ll quickly go over your requirements and provide you with some private mortgage options for your immediate consideration.