We all know that buying any real estate property, especially a commercial one, is no joke. Not only are these assets more in demand but they tend to rake up some serious cash too. Not surprising as they are often situated in prime areas around town. Add in the factor of competition and things have blown up but not beyond any smart investor’s reach. They make use of a tool called Commercial Bridging Finance.
But what is commercial bridging finance? Simply put, it is a type of short term loan that bridges the gap between the pre-purchase costs and short term liquidity needs to the pending permanent and often bigger source of funding (e.g. mortgage, sales proceeds, bank loan, income, and etcetera). We all know that pooling a sum as huge to finance such an acquisition takes time either because the source needs to be pooled over a series of months or processing it is downright meticulous and sometimes even both.
So why not wait? Patience is a virtue but sometimes it’s not the best way to go especially when we’re talking about a commercial property that’s hot in the eyes of investors and buyers. A good asset won’t stay up for sale for a long time because people will want to grab the opportunity as quickly as they could.
If we don’t have the resources yet, how do we play the game? Do we just pass? Not necessarily because in business an opportunity lost can also mean financial losses. Since a commercial bridging finance was designed to cater to immediate and short term liquidity needs, it takes care of the pre-purchase costs or those expenses that need to be provided for to make the transaction happen.
Oftentimes, it covers the research expenses, the professional fees (e.g. lawyer, real estate agent and surveyor), the tax requirements and most importantly the security deposit and down payment which seals the deal. This way, the commercial asset is secured before anybody else.
So are we saying that a second loan must be had? Technically, a commercial bridging finance is another loan but it is short term in nature and is an interim method not a permanent and long term one. It spans only a couple of months to at most of two years until one’s permanent funding becomes available which at the same time will close and pay up for the bridge. Visit this website Alternative Bridging.