How Bridge Loans Make Property Acquisitions Easier in South Florida

South Florida is a prime location for investing in commercial real estate. Properties ripe for acquisition and rehabbing abound and the demand for real estate is high. The key to success is finding the financing you need when you need it. HML Solutions provides loans for property acquisitions and renovations. These bridge loans give you short-term financing up to three years, after which you can refi or sell the property.

How Investors Can Use Bridge Loans

Bridge loans are commonly used to finance the acquisition of and improvements to multifamily housing. If an investor purchases a 90 percent occupied property with the intention of updating the kitchens and baths, these renovations will have to be done over time. 

The bridge loan allows the renovations to move ahead while the owner organizes long-term financing. When they are finished, the property has more value and the owner can raise rents, making the property more attractive for long-term financing options.

Loans insured by the U.S. Department of Housing and Urban Development are an excellent way to finance a property in South Florida. The main drawback is that they can take a long time to get. A typical time frame for a HUD loan from application to receipt of money is four to six months. That’s just too long for some developers to wait.

A bridge loan can be used for the purchase of the property and paid off when the HUD loan comes in. This enables investors to move quickly on great properties when they show up on the market. HML Solutions will even underwrite the HUD loan application as a part of the process.

Bridge loans are great tools for investors utilizing the Low-Income Housing Tax Credit in South Florida, which can take a year to complete. They can also be used to hold a property while the owners evaluate the resell market. In short, any time an investor needs money quickly, a bridge loan fills in the gap.

Bridge Loan Guidelines

Because bridge loans typically include underwriting for long-term financing, they have similiar credit criteria to other commercial loans. For example, HML Solutions will evaluate factors such whether the market can support a rise in rents. It’s important to ensure that investors can secure permanent, long-term financing at the end of the bridge loan.

Investors are usually required to have 10 to 20 percent equity in the project. You will also need a solid business plan and a good net operating income. If you will be adding value through renovations or raising rents, these things will also factor into the loan.

HML Solutions offers great terms and conditions on bridge loans in South Florida. Most are adjustable-rate mortgages where you will make interest-only payments. If you pay off the loan early, you only have to pay six months interest with a one to two percent exit fee.

If you want excellent leverage for your next property acquisitions, get a bridge loan from HML Solutions. They give investors the time and money they need to bridge the gap between finding the deals and financing the deals.

Using Bridge Loans to Expedite Commercial Property Purchases in Florida

Imagine you’ve found a commercial property that’s exactly what you’ve been searching for, with an impressive price tag that you know will attract competition. You don’t want to miss out on the property due to lack of funds, but you also know you can’t risk taking out a traditional loan because you don’t have time to wait for it to go through. What do you do? Fortunately, here at HML Solutions, we have a loan product that’s perfect for this type of situation. Our bridge loans make it easier to expedite commercial property purchases so you don’t lose out to someone else who already has funds available to snatch up the property you want.

Bridge Loan Details 

Like other types of commercial loans, bridge loans require the borrower to have a good credit profile. However, unlike other loans, bridge loans are always intended to provide short-term financing. The advantage of a bridge loan is that it is generally quicker and easier to obtain than permanent financing. Thus, it can “bridge” the gap between your current lack of funds and approval for long-term financing.

Here are a few more details you should know about our bridge loans:

  • They usually have adjustable rates
  • They typically have interest-only payments
  • Some may have an “exit fee” due when the loan is paid off
  • You may be able to receive a loan for 90% loan-to-cost

Though bridge loans typically have higher fees and rates than other types of loans, they may still be worth it for certain situations. Due to the speed with which they can be obtained, they may be able to help you make property purchases that you’d otherwise be unable to make.

How to Use Bridge Loans

There are two main situations when bridge loans are ideal: value-add propositions and deals that require immediate purchasing power. Most commonly, bridge loans are used to help acquire multifamily property that requires upgrades and renovations. When 90% or more of the building is occupied, such upgrades will need to be made a little bit at a time. Bridge loans can help provide the short-term financing required for these projects.

People also commonly turn to bridge loans when they want to facilitate financing they’ve received through an HUD-insured loan. If you find yourself in a situation similar to this, a bridge loan may be the ideal short-term solution for your needs.

A bridge loan can also give you more time to evaluate the market if you’re not sure whether you want to refinance or sell a stabilized property you already own. In short, a bridge loan can buy you time so you can make the best investing decision.

Contact Us

If you think a bridge loan sounds like something you’re interested in, we encourage you to contact us. We’ll have a conversation with you to discuss your financial needs and make sure the benefits of a bridge loan outweigh the associated risks and costs. We encourage you to contact us today and request a quote or ask us about the many different loan products we offer. We’ll help you determine which financial solution is the best fit for both your short-term and long-term financing goals.

Why Florida Entrepreneurs Use Bridge Loans for Business

There is a time and a place for bridge loans, but it’s essential for borrowers to know these loans do come with a higher risk than other types of loans. To make sure you apply for the best possible loan solution for your situation, it’s important to learn as much as you can about the structure, terms, timing, benefits and risks associated with bridge loans. These types of loans are commonly used for business mergers because they are so quick and easy to obtain. Here’s why Florida entrepreneurs commonly use bridge loans for business, even though they come with higher fees and interest rates than most other loans.

Why Bridge Loans Appeal to Florida Entrepreneurs

Securing a bridge loan quickly may be the best way to avoid missing out on business opportunities. Since timing is everything when it comes to taking advantage of a good business merger opportunity, most borrowers won’t bother with traditional loans that can take weeks or potentially months for approval. Depending on how good the deal is, it may be unavailable by the time traditional loan approval is granted. 

That’s where bridge loans come in. Though they are associated with complex loan terms, they do offer rapid funding. This rapid arrival of funds can help entrepreneurs avoid missing out on an acquisition opportunity that is likely to be snatched up quickly. Any wise bridge loan applicant should know, though, that the associated fees and interest rates can make the balance of the loan tricky to pay off. That’s why it’s extremely important to make sure the projected financial benefits of the acquisition are sufficient to pay off not only the original amount of the bridge loan, but all fees and interest associated with the loan. 

How Bridge Loans Are Structured

A typical bridge loan is structured to provide very short-term financing (typically less than 12 months) with the primary role of filling a financial gap. Usually, this gap is filled once the borrower secures permanent financing or receives sufficient cash to pay off the loan through the sale of another owned property. The interest rates associated with bridge loans varies, but is primarily based on the credit profile of the borrower. The better the profile, the lower the interest rate, and vice versa. 

However, no matter how pristine the credit profile of the borrower may be, the interest rate associated with a bridge loan will almost always be higher than the rates associated with long-term forms of financing. Additionally, such interest rates tend to trend upward over time, though they may be subject to a cap. 

Bridge loans typically convert automatically into term loans or bonds if they are not paid off within their stated terms. Generally, these term loans or bonds have a maturity of anywhere between five and 10 years. they also have higher interest rates than other loans with comparable terms. When a bridge loan converts to a loan with a longer maturity, the borrower may be required to pay liquidated damages. 

Other notable features of bridge loans include the following:

  • Securities demand. This gives the lenders the right to require that the borrower refinance the bridge loan by using the capital markets to issue long-term debt securities. When the securities demand conditions are met, the control of the long-term financing market timing is given to the investment bank. Sales process requirements, timing, and number and size of the securities demands are all points of negotiation. 
  • Securities demand failure. If the securities demand fails to provide enough funds to fully repay the bridge loan, borrowers and lenders usually negotiate solutions. Generally, the lender will request the freedom to increase the interest rate on the bridge loan to the highest allowable rate or modify the terms of the loan to include defeasance. Other solutions may include defaulting under the loan or payment of a rollover/conversion fee. 

Borrowers may also seek to limit the repercussions of a securities demand failure by requesting a provision that permits them to refuse a potentially adverse securities demand. 

Bridge Loan Fee Structures

Borrowers who have never taken out bridge loans before are encouraged to learn as much as they can about the fee structures associated with such loans. Potential fees include the following:

  • Funding fee. This is a fee that is payable on the closing date of the bridge loan. In the event that the bridge loan is refinanced before it matures, some lenders may partially refund this fee, depending on the time that lapses between funding and repayment. 
  • Commitment fee. This fee is typically payable whether not the bridge loan is funded or not.
  • Duration fee. This periodic fee is added to the bridge loan’s outstanding balance. Sometimes, the duration fee increases over time. 
  • Bond underwriting fee. Underwriting a bond to take the place of the bridge loan typically comes with an associated bond underwriting fee. 
  • Conversion/rollover fee. This type of fee is typically applied if the bridge loan is not refinanced when it reaches the end of its initial term and goes through the long-term financing conversion process. Usually, the conversion or rollover fee is equal to an underwriting fee which would have been applied to the loan if it were replaced in a bond offering. It is possible that the funding fee could be eligible for a refund based on when the bridge loan is repaid once the initial term ends. 
  • Deal-away fee. This fee applies to the lenders on the loan closing date if any other financing source is used. It’s designed to help compensate lenders for fees they would have received if a bridge loan was used. 
  • Refinancing fee. If the loan is refinanced before its initial term is over, a refinancing fee may be applied. This fee is usually equal to the conversion or rollover fee. 
  • Administrative agent’s fee. If the loan is syndicated, the lender usually receives an administrative agent’s fee once the loan is funded. This fee may be applied annually for the life of the loan.

Some of these fees could overlap others (such as the bond underwriting fee if the same investment bank that issues the loan places the bond offering). To avoid unexpected fees, it’s very important for borrowers to carefully review and analyze the terms of a bridge loan before closing. It is also important for borrowers to make sure a bridge loan and its associated fees are outweighed by the benefits associated with acquiring the money quickly to engage in business mergers or for other professional deals or goals. Though they are associated with higher costs and fees than some other types of loans, bridge loans are still ideal for certain situations that require financing to be obtained very quickly. Without this option, many entrepreneurs would likely find themselves unable to act quickly enough on business deals to obtain their goals. 

Flex Provisions

Market flex provisions in fee letters may be a viable option for sponsors who know how to fully negotiate underwritten commitment letters that have multiple arrangers and lead lenders. These flex provisions can apply to bridge loan commitments and allow for broad discretion in regard to varying the terms of financing. Capital market conditions, leverage, sponsor relationship and other factors can determine the scope of flex rights. However, in applicable situations, loan terms such as maturities, price, financial covenant calculations and structure may be subject to flex.

Determining if Bridge Loans Are Right for You

Astute borrowers should understand that bridge loans aren’t the best solution for every situation. However, when time is of the essence and a deal needs to be made quickly, short-term loans like these come in handy. It’s important to try to seek the best terms when it comes to bridge loan financing to ensure the benefits of this type of loan outweigh the increased initial costs. With negotiation and knowledge, borrowers may be able to limit their risks. Here at HML Solutions, we always give high priority to the needs of our borrowers. As with all our other loan products, we structure our bridge loans to be as generous as possible.

Our primary goal is to help our borrowers secure financing that is the right fit for their current needs. We’ll sit down with you to make sure a bridge loan is truly the best option for your current situation. If we don’t think it is, we’ll recommend one of our other leading loan types. You’ll find that we are very easy to work with and have some of the best rates and terms in the industry. You’ll also find that working with a private lender is often more rewarding and enjoyable than working with a big bank. 

Contact Us

If you need financing to help you merge with another business or meet your pressing entrepreneurial goals, we can help. Whether you apply for one of our bridge loans or select another financial product from our impressive portfolio, we’ll be happy to walk you through the application process. We’ll answer any questions you have about our various loan products and explain their benefits and terms to you in detail. To get started, contact us today during regular business hours or reach out to us through our online form at your convenience. We look forward to meeting your financing needs!

Using Bridge Loans for Business Acquisitions in West Palm Beach, FL

If you need a loan quickly and you don’t have time to wait for traditional loan approval, a bridge loan from HML Solutions may be the right solution for you. This type of loan offers very quick approval, but it’s only designed to be a short-term loan. Unlike most other types of loans, bridge loans do come with higher interest rates. That’s why they’re generally only recommended for certain situations, such as for business acquisitions. So if you want to acquire another business but you don’t currently have the cash flow to jump on the opportunity, a bridge loan can help, though you should be thinking about how you can pay it off within the short loan term allotted to you. 

How Bridge Loans Work

Before you decide to apply for a bridge loan, there are some things you should know. Here are our bridge loan basics.

  • Approvals are fast and provide you with cash flow in a pinch.
  • This is not the type of loan to apply for if you need long-term financing. However, it can bridge any financial gap you have while you wait for permanent financing.
  • Generally, the cost of a bridge loan coincides with the loan term. The shorter the term, the less expensive the cost of the loan.
  • Bridge loans come with a variety of fees, high interest rates and high collateral. That’s why you should make sure you’ll be able to come up with the money required to not only pay off the loan, but all fees and costs associated with it.
  • Collateral for this type of loan can typically include inventory or real estate.
  • Borrowers with good credit scores and low debt are likely to receive better bridge loan interest rates than borrowers with poor credit scores or high credit card debt.
  • Open bridge loans don’t already have funds lined up for loan repayment.
  • Closed bridge loans already have funds lined up for loan repayment.

If you have questions about applying for a bridge loan, we’d love to answer them. While this type of loan isn’t ideal for all situations, it can help you avoid missing out on appealing business acquisitions due to lack of funds.

Questions to Ask Before Applying for a Bridge Loan

Before applying for a bridge loan, here are a few questions you should ask yourself:

  • Do I really need a short-term loan solution, or is there a different type of loan that would be more appropriate for my situation?
  • Are the fees and collateral associated with this bridge loan worth paying? Will the business I’m acquiring be worth the risk of taking out a bridge loan?
  • Am I lining up long-term financing that I can use once I pay off my bridge loan?

Once you honestly answer these questions, you’ll have a better idea about whether or not a bridge loan is truly the best option for your current situation.

Learn More

We’d love to talk to you more about the process of applying for a bridge loan and determining if this is the right loan solution for your needs. Contact us today and we’ll help you schedule your obligation-free consultation.