How Brokers Can Leverage Bridge Loans to Close More Deals

In the competitive world of real estate investing, having a reliable financing solution can make all the difference. Investors often run into challenges with loan timelines and needing additional funding for completing their projects. It helps to have access to fast, flexible financing they can utilize to overcome these common issues. This is where bridge loans step into the frame. These loans help investors move forward with projects and find success when they otherwise wouldn’t have been able to.

Are you a broker or lending partner who’s been considering offering bridge loans to your clients? Here is how they work and how they can help you close more deals.

What Are Bridge Loans?

Bridge loans are short-term financing programs offered by private lenders rather than conventional lenders like banks or credit unions. Bridge loans are known for their speed and flexibility, which helps borrowers close deals even if the property or their financial history disqualifies them from securing a traditional loan. They’re often used to “bridge” gaps in an investor’s finances, but they can also be used for a variety of other purposes like fix and flip investments or value-add projects. They are also incredibly useful in time-sensitive scenarios since they can be approved in a matter of days, unlike conventional loans which can take weeks or months for approval.

The Advantages of Bridge Loans for Brokers

For brokers and lending partners, bridge loans can help close more deals because of a few key advantages they provide over traditional loans. Faster closings means that clients can secure properties quickly, which is a major benefit in competitive markets where opportunities don’t last long. Bridge loans also help you fund a broader range of deals, including fix and flip investments. Plus, offering a variety of financing solutions helps position you as the go-to problem solver for investors, which can lead to both repeat business and referrals to new clients.

Key Scenarios Where Brokers Can Recommend Bridge Loans

There are a few key scenarios where bridge loans are an ideal financing solution. We have already mentioned fix and flip investments, where bridge loans can provide additional funds to cover renovations, and the shorter timeline of the loan is more suitable. Investors commonly use bridge loans for buying a property before selling an existing one, allowing them to move forward with a lucrative deal while giving them time to liquidate pre-existing assets. Auction and foreclosure properties can also be great opportunities for bridge loans, as these deals often require fast funding which traditional lenders cannot provide. Finally, bridge loans can be used for value-add opportunities, such as stabilizing the value of a rental property, giving investors a better chance to secure more permanent funding.

How Brokers Can Partner with Private Lenders for Bridge Loans

Private lenders can assist brokers and wholesale lending partners by providing them with superior loan products, like bridge loans, to assist them in funding investment projects. While brokers are the boots on the ground that connect their clients with financing solutions, it’s a private lender’s job to provide brokers with flexible lending solutions and resources to make closing deals easier. Brokers should vet several lenders, examining their program terms and workflows to ensure the best experience for their clients.

A stellar lending partner will have experience with bridge loans and in the real estate lending space and will be able to provide additional resources like training programs and connections to other experts in the industry. As you continue to build a working partnership with a private lender, you may gain access to benefits like reduced fees and a streamlined application process to help you close more deals.

Overcoming Common Bridge Loan Issues

There are some common hurdles your investor clients may encounter when using bridge loans, and it’s important that you educate them to help alleviate their concerns. First, as these are short term loans, the borrower must have a solid exit strategy in place before the end of the loan period, whether that’s selling the property in question or securing more permanent financing for it. It may even be a good idea to come up with a contingency plan in case the first strategy doesn’t work out as they had intended. Additionally, the short-term nature of these loans often means a higher interest rate when compared to conventional mortgages. You should highlight the added flexibility and speed these loans provide to compensate for the additional costs.

When it comes to qualifying for a bridge loan, personal income and credit are less important than the potential of the property being used as collateral. However, lenders may use these factors to determine loan amount/leverage, as well as ensuring the borrower’s ability to repay the loan.

Actionable Tips for Brokers Leveraging Bridge Loans

Last but not least, here are some actionable tips brokers can use to maximize the effectiveness of bridge loan solutions. Always start by educating your clients on the ins and outs of this type of financing, including loan period, interest rate, and the importance of a solid exit strategy. Educating yourself and knowing when to use bridge loans is just as important, as they have some distinct advantages they can provide over conventional mortgages.

You should also take time to position yourself as an expert in creative financing solutions, like bridge loans. Market the fact that you offer a diverse range of loan products, and once you have some deals under your belt, you can highlight case studies and success stories. Social media and email marketing can be very effective with these efforts, as it allows you to connect with your existing network and also build your brand as a financing partner.

RCN Capital

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 investors. If you are looking to finance a real estate project, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.