Bridge loans are a great way for real estate investors to fund their deals in the cases where traditional financing options don’t make the cut. These loans offer borrowers unrivaled speed, flexible loan criteria, and the chance to expand into more types of projects. But while bridge loans can be incredibly effective tools for investment purposes, they are not a one-size-fits-all financing solution. There are a number of factors that affect how a deal plays out, and it’s up to lending partners like you to help clients decide whether bridge financing is right for them.
Are you a broker or lending partner looking to add bridge loans to your product offerings? Here’s what makes them such a useful financing tool, and how they help bring more value to your clients.
Bridge loans differ from conventional financing solutions because they are short-term, asset-based programs. Being asset-based means that the loan is backed by collateral (typically the property being financed) which allows the lender to be more flexible with lending criteria. Lenders have the ability to close loans faster, approve a wider variety of projects, and qualify borrowers for financing even with limited credit history. This unmatched flexibility is a great tool for a financial provider to have as well, since it allows you to fund deals even when other lenders aren’t able to, and positions you as a creative financing problem solver.
Bridge loans are an ideal financing solution in a number of deal scenarios because of the advantages they provide over standard loans:
Before recommending a bridge loan to a client, consider their comfort with short-term projects as well as their overall experience in real estate. These loans provide investors with many advantages, but they demand solid planning and a viable exit strategy from the borrower. Make sure your clients understand the structure of the loan, risks associated with it, and the steps they’ll need to take to ensure repayment. You should also recommend your client come up with a contingency plan in case their initial exit strategy doesn’t pan out.
The conversation about bridge loans can begin naturally, as you get to know your client and their specific deal scenario. Position bridge loans as a viable solution for investors who need funding fast, who are flipping properties, or who are in between property transactions. As you get to know their deal, present them with a number of solutions including bridge loans, and walk them through the pros and cons of each option. A common objection with using a bridge loan is the high rate that comes with them. You can counter this by framing them as an opportunity to generate a higher return in the short-term, and gain access to lucrative deals which were not previously viable.
You play an important role in helping investors find success with their projects. As you begin to build relationships with clients, you get a better understanding of their long-term goals and financial constraints. This is where recommending the right loan at the right time builds trust and leads to repeat business. Bridge loans are just one of the many tools you can add to your belt as a financing partner. It’s up to you to get to know each client’s unique situation and offer solutions that will improve their investment experience.
The best way to save on a real estate investment is to obtain financing from 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 professionals. If you are looking to offer bridge financing programs to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.