Bridge Loans

Bridge loans are short-term loans and are also known as swing loans or bridge financing, as they bridge a temporary lack of funds. In most cases, bridge loans are paid back quickly, either through a long-term loan or by the sale of land or property. For example, a home for sale can be used as collateral for a bridge loan, and this money is used to close on another home before the first one sells.

Essentially, bridge loans allow you to buy real estate (or other assets) through a short-term loan before more permanent, long-term financing is established. Once the property is yours, you can get a new loan, part of which may be to pay back the interim loan. You can then sell the property that was used to collateralize the bridge financing, letting you swing your equity from one property to the next.

How to Get Bridge Loans

There are many factors involved with the loaning process, and each lender will have different criteria. A business plan or detailed summary of your financing will not only make you look more professional, but it will make your lender's job much easier. Also, being prepared is always a check in the plus column when you apply for a loan.

Your business plan should answer the following questions: how much money will you need? How will you spend it? What collateral do you have? And, how will you repay this loan? When these questions and answers are clearly laid out, the loan process will be easier--and your chances of getting the loan will be better.