No commercial bridge loan lender will sign a loan without knowing how they will be paid back. They want to know how you intend to repay the loan you are asking for, which makes complete sense. Having a clear exit strategy is often more important to the application process than credit history. Bridge loans are available in days instead of months, and interest rates reflect this elevated level of risk. The loan duration is shorter, a year or less, and paying back the loan before the end of the term will save money in penalties. It pays to have an exit strategy and here are two of the more common ones.

Selling the Primary Property

The sale of the primary, or security, property is the most common and simplest exit strategy. In using this strategy, it is important to be realistic, and conservative about the sale price of the property and timing. Selling property can take longer than anticipated, and any experienced real estate investor knows this. Buyers can drop out, and things within the housing market can change fast, so being flexible and knowing what to do is important.

Refinancing the Loan

The other exit strategy involves refinancing the bridge loan. If the property is being improved, it’s important to leave enough time after the work is complete to secure longer-term financing as an exit. Mortgages take a long time to secure, and a bridge lender may ask to know that refinancing is a realistic option. They might ask to see an agreement in principle from a long-term lender. All of this is designed to mitigate the risk in an already high-risk venture. Bridge lenders work faster than traditional lenders because they are willing to assume more risk, but they have limits of their own.

GF Capital is a commercial bridge loan lender in Southern California. We make our own deals, with our own money, and we close fast. Contact us today.