Are you considering taking out a bridge loan? If the answer is “Yes,” keep reading to learn more about the pros and cons of this effective form of short-term financing.
What Is a Bridge Loan?
A bridge loan is a form of short-term loan that borrowers use to cover their immediate cash flow needs while they secure more permanent financing.
A typical use of this type of loan is when a homeowner wants to buy a home before selling the one they currently own. In this scenario, the bridge loan is used to finance the purchase of the new home. Once the old home sells, the proceeds are used to pay off the bridge loan.
Due to their nature, bridge loans are also known as swing loans or gap loans.
The Pros of Bridge Loans
- Fast access to cash. Simply put, this is what bridge loans are designed to do. If what you need is to get cash fast, look no further — this is your solution.
- Flexibility. Although this may vary from company to company, many lenders offer a certain flexibility when it comes to the repayment terms of bridge loans. For example, payments may not be required for a few months.
- Agile. Borrowers understand that bridge loans are used in time-sensitive situations, so the process to get a bridge loan is usually simpler and more straightforward compared to conventional loans.
The Cons of Bridge Loans
- Higher interest rates. While bridge loans are obviously convenient, they come with relatively high interest rates, a fact any person looking to take out a bridge loan should beel in mind.
- It’s a short-term solution. As explained earlier, bridge loans are short-term by definition. Borrowers who need long-term financing solutions should consider other alternatives.
Alternatives to Bridge Loans
While bridge loans can be extremely effective in certain scenarios, some situations call for a different approach. If a bridge loan doesn’t fit your financing needs, here are other alternatives:
- Conventional loans. Ideal for when you need a long-term financing solution.
- SBA loans. A long-term solution with less stringent requirements than conventional loans.
- Revenue-based loans. Can’t qualify for conventional or SBA loans? Revenue-based loans may be the solution that works for you.
If you have questions about bridge loans or about any of the financing solutions listed here, contact our experts at Gellyfish Commercial. Getting in touch is as easy as using the live chat option on our home page!
Gellyfish Commercial: Certainty of Execution in BridgeLoans
If you need a bridge loan in California, or anywhere in the United States, Gellyfish Commercial can help.
Contact us today by email (email@example.com), telephone (877-800-4493), or social media (Facebook, Twitter, LinkedIn), to schedule a free consultation or to learn more about our financing solutions.