In the first case mentioned, there are times when the initial financing put in place to fund the draft plan approval process cannot be extended any further to wait until the larger development financing is put into place, which will payout the initial funding arrangements.
The gap in time where a bridge loan is required can range from a few weeks to a few years.
There are also times when the primary development financing is either insufficient to complete the project, or there are draw advancing issues that require the borrower or developer to seek out another source of funding to keep the project timelines moving forward.
In most cases, the common element is urgency to get a land development bridge loan in place as quickly as possible in order to keep the project on track.
In situations where the amount required is less than two million dollars, and the time frame to complete financing under a month, a private mortgage is typically going to be the best solution.
The keys for securing land development bridge loans is the market value of the property at the time the bridge loan will be issued, and the proposed exit strategy for repaying the loan.
For the first point, the land value will need to be supported by an AACI appraisal that has been recently completed and where the appraiser completing the work is on the private lender’s list of approved appraisers.
With respect to the exit strategy, this is typically either going to come from the sale of some or all of the property, or the refinancing of the property via a longer term and larger value land development loan or mortgage.
Any meaningful exit strategy will have to be supported by binding contractual agreements in the case of an asset sale, or a solid lending commitment from a reputable lending source where the outstanding conditions to fund are viewed to be achievable by any lender looking at the deal.
If you are in need of land development bridge loan financing for a project you are in the middle of, either in the planning or land development stage, I suggest that you give me a call so we can further discuss your requirements and review potential financing options.