Bridge Loans for Brokers: Fast Financing for More Deals

Bridge loans are a powerful financing tool that end up being incredibly useful in a number of key scenarios. These loans help investors secure properties when their funds are tied up in other deals, or when they’re looking to finance short-term projects like home flips. For brokers, they can be a valuable offering that provides clients with a financing solution when traditional loans just don’t cut it. Are you a financing professional that’s considering adding bridge loans to your offerings? Here’s how they help investors secure more deals, and how they generate more clients for your business.

What Are Bridge Loans?

Let’s start by covering the basics of bridge loans. These are short-term financing programs which generally range from 12-24 months in duration and are secured by collateral such as the property being financed. They’re typically used to help “bridge” gaps in an investor’s finances, like when they’re in the process of selling a property but would like to move forward with the purchase of another. They can be used for other short-term real estate projects, however, like for home flipping or value-add opportunities on existing properties. Bridge loans provide investors with unmatched speed and flexibility, allowing them move on lucrative opportunities faster, which is a great advantage in competitive markets.

Why Brokers Should Offer Bridge Loans to Clients

Bridge loans help brokers close more deals because they’re a versatile tool that can be used in a variety of scenarios. They’re most useful as a solution for clients who require time-sensitive financing. Bridge loans have a streamlined application designed to deliver funds quickly, with the average loan taking 1-2 weeks for approval as opposed to months with a traditional home loan. Additionally, they give brokers more financial products to offer to investors, opening them up to a wider base of clients such as fix & flip investors. By offering a variety of loan solutions, brokers can position themselves as a one-stop solution for any investor looking to solve a financing problem.

Key Features of Bridge Loans

Bridge loans have several key distinctions when compared to traditional financing solutions. The most apparent is their shorter loan term, which can be useful but typically results in an elevated interest rate. There’s also the fact that they are secured by collateral, which offers flexibility since the borrowers' personal finances are less of a factor in loan approval. This opens more opportunities to clients who have unconventional income situations, such as not having W-2 income. Bridge loans are flexible, and most bridge lenders offer interest-only options to help maximize an investor’s finances during the loan period. These loans also offer high LTV ratios, giving investors maximum leverage in their deals.

How to Position Bridge Loans to Clients

Brokers can position bridge loans as a financing solution in scenarios where traditional loans aren’t a viable option. These include bridging gaps in finances, short-term fix and flip projects, and value-add opportunities. The short-term nature of these loans often means a higher interest rate, which should be brought to the attention of clients. It also means an exit strategy is incredibly important, as lenders expect the loan to be paid back in full at the end of the loan period. Whether it is selling the property or securing more long-term financing for it before the loan ends, advise your clients to have a strategy in place already

Choosing the Right Lender for Bridge Loans

The right lending partner can make all the difference when it comes to securing a bridge loan for your clients. Take time to investigate the background of each lender, including their track record and their experience in the real estate space. Select partners that provide speed, reliability, competitive rates, and a smooth process. Lenders should also provide good customer service in case something goes wrong, or further support is needed. For instance, RCN Capital assigns an account manager dedicated to each broker, who can answer questions and take care of issues in a responsive manner.

A Broker’s Role in the Bridge Loan Process

Brokers play a crucial role in the bridge loan process. Most investors aren’t even aware of these types of loans, so it’s up to brokers and wholesale partners to educate them on their availability, terms, and possible use cases. From there, brokers facilitate the process of applying for and securing one of these loans. As mentioned, it’s important to take time and compare various lenders and loan options to find a program that’s the best fit for your client. Brokering also often involves negotiating with lenders on behalf of the client, to secure terms that are favorable to them. Your clients will appreciate the extra level of care you bring to the table, and this can help position you as a resourceful partner capable of solving all their financing problems.

RCN Capital

RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investments. If you are a broker or wholesale partner looking to provide financing for a real estate project, RCN Capital has competitive loan options available.