How Bridge Loans Gives Real Estate Brokers and Their Clients a Competitive Edge

Bridge loans are a powerful financing tool investors are using to gain a competitive edge in today’s fast-paced real estate market. They are a creative financing solution that offers more speed and flexibility than conventional loans, allowing investors to secure deals when they otherwise wouldn’t be able to. Although, most investors aren’t even aware of this loan program, and that’s where brokers step in. Adding bridge loans to your product offerings allows you to solve a wide range of your client’s financing problems and close more deals as a result. Continue reading to learn more about this highly effective loan program and how it can help both you and your clients win in today’s competitive market environment.

What is a Bridge Loan?

The main thing that differentiates bridge loans from standard mortgages is that they’re shorter in duration, with a loan period ranging from 6 to 24 months. Bridge loans were originally intended to “bridge” gaps in an investor’s finances, such as wanting to buy a home before selling an existing property. However, investors also use them as a creative financing solution for time-sensitive projects, including home flips and auction purchases.

The lenders who offer bridge loans are often much more flexible than conventional lenders and are more focused on the property in question than the borrower’s creditworthiness. This means that loans can be approved faster, and borrowers can still qualify for financing even with less than perfect credit or non-W2 income.

5 Ways Bridge Loans Give You and Your Clients a Competitive Edge

Bridge loans offer many benefits that help investors and their lending partners win in today’s competitive real estate market:

1. Speed to Close: While traditional loans can take weeks or even months for approval, bridge loans have a streamlined application process where funds can be delivered in as little as 10 days. This speed is crucial in time-sensitive scenarios and can help your clients win more deals.
2. Stronger Offers with Flexible Financing: Bridge loans help buyers make non-contingent, all-cash offers on properties, while giving them time to secure more permanent funding. This allows your clients to finance acquisitions even when their funds may be tied up in other investments.
3. Creative Solutions for Complex Deals: There are many investments that banks are not keen to lend on, like properties that need major repairs, for example. Bridge lenders are much more flexible with the types of properties that qualify for financing and can even offer additional funds to cover renovation expenses for these types of projects.
4. Repeat Business and Long-Term Client Loyalty: Borrowers who use bridge loans to fund projects often go on to secure permanent financing in the form of a long-term DSCR loan. These are also the types of investors who perform multiple projects per year, and they can become some of your best clients.
5. Stay Ahead of the Competition: Most brokers and lending partners still offer cookie-cutter financing programs, but you can stand out by offering highly flexible and investor-friendly programs like bridge loans. Marketing yourself as a proactive and creative problem solver allows you to reach more clients and enhance your position in the financing market.

How to Start Offering Bridge Loans

Bridge loans are not offered by conventional lenders like banks or credit unions, but instead by private lenders who operate in the real estate market. This gives bridge loans much more flexibility than standard mortgages, but it also means you need to take care of the partner you choose to work with. Be sure that they have experience and a good track record of delivering bridge financing, along with a good reputation in the lending space. Some lenders might also offer educational resources, such as RCN Capital’s Amplify, to help you and your team get up to speed on loan specifics.

 When it comes to having a conversation about bridge loans with your clients, be sure to frame them as an investment solution, and not just another loan product. Bridge loans are intended to have extremely specific purposes, and it is up to you to take time to educate your clients on when and why to use one. It also helps to have past projects and success stories you can refer to that give your client concrete examples of how to best use them.

Tips for Offering Bridge Loans More Strategically

Finally, let’s talk about how you can make the most of bridge loans for expanding your real estate brokerage. Identifying the right clients who would benefit from bridge financing is a key step of the process, so it is important that you familiarize yourself with its ins-and-outs along with the most common use cases. Equally important, however, is building a network of lenders that offer reliable bridge financing products. That way, you have options you can choose from, and you can be sure that you are matching clients with the most suitable financing solution.

As for the bridge loan application process, it isn’t too different than with any other type of financing, but lenders will be more focused on the property than the borrowers credit history and financials. That means you should prepare specific documents on the investment, including return estimates and renovation plans (if applicable). Lenders may still ask for bank statements and run a credit check for the borrower, but this is more for determining loan terms and plays less of a role in loan approval. Still, it’s important to have these discussions with your clients early so they can be prepared and not encounter any surprises during the application process.

RCN Capital

To help your clients maximize the returns on their next investment, partner with a lender that can provide you with the best leverages and rates. 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 investors and lending partners. If you are looking to offer new construction financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.