What is a Bridge loan, you may ask? Merriam Webster defines it as a short-term loan used to finance an enterprise, investment, or government pending the receipt of other funds.
Some people may know this term from residential real estate transactions where a homebuyer needs special financing to cover the gap between purchasing a new home and selling an existing one.
This is an excellent example of the intent and purpose of a bridge loan.
It is analogous to a literal bridge: a firm/rigid structure that allows safe passage from one point to another.
In this regard, it takes what would have been an untimely but definitive ending point and allows safe passage to one’s final destination.
Ignite Funding will offer refinance loans to borrowers who are viable candidates for additional funds or time. However, Ignite does not typically refer to these as bridge loans.
With many other lenders, bridge loans can come to the borrower at the expense of a higher interest rate. Ignite Funding, however, is not your average lender, and our business model dictates that we pay investors a consistent 10-12% on trust deed investments. As such, we charge our borrowers a slightly higher percentage consistent with this fact.
In this regard, Ignite does not differentiate between bridge loans and refinance loans. Whether you choose to call these loans interim financing, gap financing, or swing loans, our objective is to get the borrower to their destination, which can allow for the repayment of the principal due.
Below are two real scenarios where Ignite Funding has utilized bridge loans to enable borrowers to complete their projects:
The borrower is given two 9-month terms (18 months) to pay off an acquisition loan. The borrower encounters numerous permitting delays, including entering into a joint development agreement with an adjacent medical facility.
This arrangement significantly increases the value of both sites.
Ignite offers a refinance (bridge loan) that allows the borrower the necessary time to complete the acquisition phase of their project.
The borrower has utilized the full 18 months of their loan term to construct a commercial strip center. While the grey shell work has essentially been completed, additional time is required for the tenants to complete the improvement work for their individual units. Ignite Funding refinances the project with a bridge loan to take the borrower from the construction phase to a point where they can ultimately stabilize the project and pay off the loan.
You may be seeing a pattern here. The destination is in sight, but time is running out. These loans not only create a passage to the resolution of their given loans, but also gives them a tool to extend their timeline.
Bridge loans serve as a vital financial tool in real estate investing, offering borrowers the flexibility and time needed to reach key project milestones when delays or transitions arise. At Ignite Funding, we view these loans not just as temporary fixes but as strategic solutions that align the interests of both investors and borrowers. Whether it’s navigating permitting delays or finalizing tenant improvements, our approach to bridge financing ensures that projects don’t stall at the finish line, they cross it. In doing so, we don’t just fund real estate, we build enduring relationships and proven outcomes.