Commercial Bridge Loan Seekers, Here are 5 Watch Outs With Commercial Bridge Financing

As a result, a huge number of these business people are having to get a commercial

bridge loan on their commercial property to tide them over a few years until commercial credit is freed up or until they sell their property. And while these loans are not cheap, they can mean the difference in hanging on to their property and losing it. However, there are some conditions for these loans or mortgages that a prospective borrower needs to be wary of. Here are 5 critical watch outs you need to be aware of.

Prepayment penalties A business borrower needs to try and avoid a loan with a prepayment penalty as just like with the sub prime implosion, these penalties can wreak havoc with your future refinance or sales plans. Not having a prepayment penalty gives you a lot more flexibility.

Loan term Commercial borrowers need to be sure the term is long enough to get them to the next phase whether it be a refinance or sale. Too short a term can get you right back into hot water. If you avoid a prepayment penalty, there is no downside to a longer than needed term as kind of insurance.

Borrowing too little You need to be sure you borrow enough to cover those little (or big) surprises. Again as in number two above, it's just good insurance particularly in these uncertain economic times.

Borrowing too much Yes, I know I just warned against borrowing too little but you can easily go overboard and borrow considerably more than you need. If you're buying or constructing a commercial building, it's real easy to borrow enough to cover all those "bells and whistles" that are best done from future cash flow of your property or business.

Using the wrong loan structure A commercial bridge loan can be structured many ways. Be sure that you don't just take the first loan structure that is presented to you by the lender. Be creative. You may want an experienced third party to help you figure what structure is best for you and your business. Remember, the lender will propose what is in their best interest. You need to counter with what is best for you and your business.

So there you have it, 5 things to be wary of when securing a commercial bridge loan. Take note of them and use them when negotiating your commercial bridge financing.

Commercial Bridge Loan Seekers, Here are 5 Watch Outs With Commercial Bridge Financing

By: Ron Stone

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