5 Characteristics of Bridge Loans

One of the things we specialize in are bridge loans. Bridge loans constitute a specialized form of lending designed to meet immediate cash needs without having to go to a bank. We have helped many clients make their dreams reality through bridge loans individually structured to their unique needs.

Needless to say that not all bridge loans are offered under the same terms and conditions. Like anything else in financial services, loans vary from one lender to the next. We believe ours are among the best in the business. In demonstration of that, consider these five characteristics of bridge loans:

1. They Are Short-Term

Also known as hard money loans, bridge loans are purposely short term. What do we mean by that? A typical bridge loan is made for no more than one year. But one year is on the high side in this business. Most lenders offer loans for just six months and then charge higher fees for it. We generally do not operate that way.

Our bridge loans can extend to a full 12 months. As such, you don’t pay as much because the points do not approach such a high annual rate. We believe this is the best way to make affordable bridge loans available without hurting your bottom line.

2. They Can Be Rather Sizable

Bridge loans for business are designed to meet extensive capital needs that banks are unwilling to look at. As such, a loan can be rather sizable. We offer loans of up to $2 million in most cases. However, we are not like most lenders in that we have no firm minimum. We are willing to look at each individual case to determine an appropriate amount. Know that we have done loans for under $100,000. No loan is too small for us.

3. They Are Backed by Collateral

The fact that bridge loans are required to meet immediate cash needs suggests that a borrower’s cash flow is insufficient for said needs. That means lenders require some sort of collateral to protect their investment. For example, consider a builder looking to acquire a new parcel of land for development. The client might offer an existing parcel of land and its buildings as collateral. We would then determine how much we are willing to loan based on the value of that collateral.

4. They Are Great Equity Financing Tools

One of the more common uses for bridge loans is that of supporting equity financing. A company might apply for a hard money loan with the goal of using the cash to cover inventory, payroll, rent, and other expenses until sufficient equity funding is raised. This allows the company to begin operating – or continue operating in some cases – before the next round of funding is secured.

5. They Can Be Easier to Get

This final characteristic is that which separates private lenders like Actium Partners from traditional commercial banks. Where banks often require clients to jump through hoops during the application process, private lenders are a lot easier to work with.

Banks start with exhaustingly long loan application forms. They require reams of documents to prove financial viability. They require an investment of time that is better spent doing other things. Private lenders, like Actium, certainly do our due diligence before lending. But our process is faster and a lot easier.

A bridge loan from a private lender is not necessarily the best way to raise cash in every case. But in cases where it is appropriate, a bridge loan is quite often the best option. Bridge loans provide for immediate cash needs among companies looking to expand, or to provide funds until the right amount of equity can be raised.