A bridge loan is a short term loan used to “Bridge” the gap between permanent financing or to cover certain short term costs.
A “Bridge Loan” literally bridges the gap between financing periods. Bridge loans are usually shorter term (up to a year) and carry a high interest rate. A bridge loan is used to secure working capital for a business when financing is closing in the future.
A good example of a bridge loan:
A business expects to secure equity financing in three months, but they need cash flow NOW to “bridge” the gap until the financing comes through. They would iron out terms of a bridge loan and be funded until their financing comes through.
nFuse Capital is an excellent source for Real Estate Bridge Financing, a popular option for investors who purchase real estate with the intent to renovate and resell in a relatively short period of time.
Most real estate bridge loans main requirement is the borrower having a good chunk of their working capital invested into the property. A normal rate is 65% ARV(After Repaired Value). Bridge loans are lent based off of the property and not on the individual. These loans take about 17-30 days to fund.
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