Commercial bridging loans and its siblings were born out of a need, that which has been brought about by differences in time. Considering how much resources it takes to buy real estate properties both then and now, timing is a crucial factor as the availability of such resources can make or break a great opportunity. And really, who wants to lose their chance?
It’s common knowledge that money is hard to come by. Aside from having to work hard for it, it takes a lot of waiting to pool them up as well. Where income options like salaries, retained earnings and sales take a while to pool or reach a certain threshold, credit takes time to arrange and even that does not guarantee an approval or cash release. But buyers need immediate resources especially since real estate acquisition requires pre-purchase expenses and this short term liquidity needs are what commercial bridging loans provide for. But what are they specifically? We’ve listed them down.
- PROFESSIONAL FEES – Buying an asset would mean having to look into various legal requirements and documents calling the need to hire a lawyer or solicitor. There’s a real estate agent or broker for those that require professional help in looking for the right asset too and not to mention fees for a chartered property surveyor who shall examine and assess important property related matters such as market value, condition, legal and ownership issues, safety concerns, depreciation, value appreciation and more.
- SECURITY DEPOSIT – This is the price paid to a seller in order to secure a hold on the asset while for long term financing like a mortgage, a bank loan or proceeds from a sale. This prevents them from selling the asset or offering it to another buyer within a stipulated period. In some cases, this is referred to as an earnest payment.
- DOWN PAYMENT – This is the percentage of the entire price of the commercial asset which has to be paid upfront and in cash, oftentimes around 20% of the entire list price. Failure to do so creates an opportunity cost.
- RESEARCH EXPENSES – Simply put, looking for the right commercial asset takes a lot of work and even financial resources. This applies regardless and whether or not one chooses to look on their own or hire a professional to do so.
- EMERGENCY NEEDS – But apart from pre-purchase, commercial bridging loans may also be utilized in pressing situations such as when one needs immediate cash to prevent a foreclosure or when immediate repairs and maintenance have to be done.