Bridge loans are short term in nature. These types of loans have several important purposes to those in the real estate investment industry.
The Arizona Bridge Loan is a short-term gap for a borrower before they can secure permanent financing for a project. When the permanent financing is secured, or the property sells, then the bridge loans are expected to be paid back. Utilizing a Arizona Bridge Loan is mostly used for big real estate projects of projects that require huge capital outlays at the initial, middle or completion stage of the project. On smaller projects, the Arizona Bridge Loan could be used to initiate or complete a project.
Repayment of the Arizona Bridge Loans is done when the permanent funding is secured for the project. For example, the Arizona Bridge Loan is repaid on a project when the company received the equity investments from venture capital firms. Alternatively, bridge loans are repaid once an investment has been received from a private investor. There are some institutions that require that the Arizona Bridge Loan be paid irrespective of permanent financing being secured.
Bridge loans, in most cases, do not require a high level of collateral for the funding. Collateral for a loan mostly is restricted to permanent funding. However, some lending institutions may require a lien on the assets of the project. Should the borrower default on the repayment of the loan, then the lending institution can take over the project and sell it to recoup the loan. There may be a wavier for the collateral based on the viability of the project or if the borrower can demonstrate a firm commitment that the loan will be paid from new investors.
The Structure of a Arizona Bridge Loan
The tenure of the loan is short-term in nature, the structure of the loan can be three (3) to twelve (12) months depending on when permanent funding can be expected. The term of the loan will also depend when the funds are expected to be released. For example, if permanent funding is dispersed over three (3) months then the Arizona Bridge Loan term will be structured to accommodate the permanent funding.
The cost of funds for the Arizona Bridge Loan are routinely in the range of four (4) to six (6) percent margin on the Interbank Rate, depending on the risk that lender is taking. Understand that the Arizona Bridge Loan is inherently risky, so higher rates are charged accordingly.
You should secure a Arizona Bridge Loan when you have secured a commitment for permanent funding. This permanent funding should be obtained in the short term then you proceed with securing the Arizona Bridge Loan until the permanent funding will be disbursed. If your timing is off and the permanent loan funds are not disbursed in a timely manner, then you will be forced to pay higher interest on the bridge loan, and this may jeopardize the profitability of the project. Just remember that the Arizona Bridge Loan will be paid off with the funds from the permanent funding expected. The Arizona Bridge Loan should not be secured until you are sure that the permeant funds will be disbursed, or the project may face a critical delay. There is no purpose to obtain a Arizona Bridge Loan if the funds cannot be used right away.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
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Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.