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Bridge Lending How to Shop for the Perfect Loan

3/1/2017 12:00:00 AM   0 Comments   bridging loans, buy to let

Bridge Lending 101: How to Shop for the Perfect Loan

Whether youre planning a trip or buying a car, there are more than a dozen guidebooks on how to choose the right option. However, when it comes to a significant decision like choosing a commercial real estate bridge loan, there is a surprising lack of literature on how borrowers can identify the best loans for their projects. In the current lending market, bridge loans will become increasingly vital.

Following the Great Recession, banking regulations significantly tightened, which led to the current appetite for bridge loans among borrowers. Most conventional lenders exited the space, with flexible, albeit more expensive, capital filling the gap, promising certainty of execution for the acquisition or refinance of transitional assets across the country.

While new options emerged in 2010 and 2011, the access to bridge capital was not particularly widespread until more recently, when different capital sources saw the proven returns generated by various players throughout the capital stack. The pool has since grown substantially, increasing competition within the bridge loan space.

To fully understand the current bridge lending market, its important to first identify the types of lenders and what theyre offering. On one end of the spectrum are institutional debt funds, which typically provide lower-cost, lower-leverage loans and generally lend on core, institutional assets in primary markets. On the other end, youll find high-yield, high-leverage lenders like Calmwater Capital, which can close quickly and provide flexible structures in order to allow borrowers to execute their distinct business plans. Experienced lenders in the bridge space have filled a niche that differs from that of permanent lenders, in that capital can be provided for non-cash-flowing or vacant properties, where competitive lenders are focused on basis and bridging to the permanent loan take-out.

Eric Jordan
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