Flexibility Is One of the Biggest Advantages of Private Bridge Loans
What do you normally think of when the topic of private lending comes up? If your first thoughts are about hard money and bridge loans, you are probably an experienced borrower. On the other hand, negative thoughts fueled by all the stuff you have read online indicate you probably have not engaged with private lending before.
Private lending is one of those industries that remains largely misunderstood by most people. Your average consumer thinks of private lending as a shady industry dominated by predatory lenders looking to take advantage of the weakest among us. Reality paints another picture.
Take bridge loans. Firms like Salt Lake City’s Actium Partners offer commercial bridge loans for a variety of purposes. They have the flexibility to write their loans in whatever way makes the most sense for them and their clients. They are not locked into a rigid formula.
Its Purpose Is in the Name
The basics of a bridge loan are pretty easily understood by simply looking at the name. A bridge loan is a short-term loan intended to bridge the gap between an immediate financial need and a future source of funding. Commercial bridge loans typically have terms of 3-6 months. Actium has been known to offer terms for as long as 12 months.
Regardless of the term, the main thing all bridge loans have in common is that they are designed to be repaid fairly quickly. How a borrower pulls that off varies case-by-case. One scenario would have the borrower securing traditional funding. Another might have the borrower selling an asset and using the proceeds to pay off the lender.
Money for a Variety of Needs
Lender flexibility allows firms like Actium Partners to write loans in a way that suits both them and their customers. But flexibility also offers the opportunity to fund a variety of needs.
While most of Actium’s loans are written to help clients obtain real estate, the firm does lend for other purposes. The perfect example is a company that approached Actium for a bridge loan to help them cover payroll. Apparently, the company was waiting on a payment from one of its own customers – a payment that was supposed to cover payroll but still hadn’t arrived.
This company had an obligation to its employees. They also had a piece of real estate they could offer as collateral for a bridge loan. Actium looked at the property, assessed its value, and then agreed to provide the loan. The company made payroll, employees were kept happy, and everyone moved on from there.
Traditional Lenders Are Less Flexible
Imagine that same company going to the local bank hoping to arrange a small business loan. Banks don’t have that kind of flexibility. The local bank probably would have taken one look at the company’s loan application and denied it. Covering payroll is not one of the bank’s core missions.
This isn’t to say that bank lending is a bad thing. It is not. As traditional lenders, thanks provide valuable services that both consumers and businesses need. The only point is that traditional lenders are less flexible. They are less flexible to the point of not being able to handle unique lending scenarios.
Private Lending Is Different
Private lending is different. It is structured differently, regulated differently, and even operated differently. What makes private lending so different is also what makes it so beneficial to certain types of borrowers. Borrowers needing flexibility and speed benefit most from private hard money and bridge loans. It is because private lenders can meet their needs more quickly and effectively.
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