5 Common Myths About Bridge Loans Debunked
Are you thinking about applying for a bridge loan? A form of short-term financing, bridge loans are popular among real estate developers and investors. They are designed to fill gaps in financing. Even if you’re planning on containing long-term financing for your business, you may want to use a bridge loan. There are several myths about bridge loans, however, that you shouldn’t believe.
6 Common Myths About Bridge Loans Debunked
#1) Requires a High Credit Score
You don’t need a high credit score to obtain a bridge loan. Even if you have a low credit score — or if you have little or no credit — you can still get a bridge loan. You just need collateral to secure with which to secure it. Most bridge loans are secured using real property as collateral, so lenders generally overlook credit.
#2) Must Be Repaid Within a Year
While all bridge loans are classified as short-term loans, they are available in different term lengths. Some of them must be repaid within a year. Other bridge loans, in comparison, must be repaid within three years. You can choose a bridge loan with an appropriate term length for your business’s financing needs.
#3) Approval Takes Months
Another common myth about bridge loans is that the approval process takes months. While getting approved for a traditional bank loan may, in fact, take several months, bridge loans have a much faster approval process. As long as you meet the lender’s basic requirements, you can get approved in about 30 days — sometimes even faster.
#4) Low LTV Ratio
Some business owners assume that bridge loans have a low loan-to-value (LTV) ratio. LTV ratio is a metric used for secured financing. It represents the value or amount of a secured loan relative to the value of the collateral used to secure it. Bridge loans often have a high LTV ratio of 80% to 90%. An LTV ratio of 80% means that the lender will loan you 80% of the value of your collateral.
#5) Only Used By Real Estate Businesses
Another common myth is that bridge loans are only used by real estate businesses. As previously mentioned, bridge loans are popular among real estate developers and investors. But that doesn’t mean they are limited to real estate businesses. Other types of businesses often use bridge loans as well. Bridge loans are a popular form of alternative financing. They can fill gaps in a business’s financing by providing an injection of capital until the business obtains long-term financing.
This article was brought to you by Intrepid Private Capital Group, a Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.