Bridge loans provide a valuable financing solution when a traditional, long-term loan doesn’t make sense or isn’t an option. These loans can bridge the gap between immediate needs and a more long-term financing solution.
Not all bridge loans come with the same opportunities, term lengths, or requirements. Learn the differences between short-term bridge loans that mature after 1-2 years and longer-intermediate term bridge loans with terms of three or more years, and see what these two options look like when you partner with VCREF.
Short-Term Bridge Loans
Bridge loans can serve investors in valuable ways. Choosing between a short-term and intermediate term bridge loan comes down to understanding your needs, priorities, and qualifications as a borrower.
The main distinction between short-term and intermediate bridge loans is the term lengths these loans provide. As the name suggests, short-term bridge loans have relatively shorter term maturities.
These loans offer advantages and a possible disadvantage compared to intermediate bridge loans:
+ More flexible requirements: One of the main advantages of short-term bridge loans is that they usually come with more flexible requirements for borrowers, making it easier to qualify for these loans compared to intermediate bridge loans.
+ More versatility: Short-term bridge loans also offer more room for customization and work for a variety of situations, including when you need timely access to funding for an acquisition, when you need to refinance, when you want to finance a construction or renovation project, and more.
- Higher rates: Short-term bridge loans tend to come with higher interest rates than their intermediate counterparts. This is understandable considering these loans are typically used for less stabilized situations.
Intermediate Bridge Loans
Longer-term bridge financing offer advantages and a possible downside of its own:
+ Lower rates: Longer-term bridge loans typically offer better rates than short-term bridge loans. If getting the lowest interest rate possible is a priority, you should see whether you qualify for one of these bridge loans.
+ Lower rates: Intermediate bridge loans tend to come with lower interest rates than short-term loans. Keep in mind that the exact terms of your loan, including the loan amount and the interest rate you qualify for, will depend on a variety of factors unique to your situation.
- Stricter requirements: Longer-term bridge loans come with more stringent requirements for borrowers than short-term bridge loans do. It is generally more difficult to qualify for intermediate bridge financing, making a short-term loan a more accessible option in some cases.
The Short-Term Bridge Loan from VCREF
VCREF offers both short-term and longer-term bridge financing. The Short-Term Bridge Loan from VCREF comes with the following terms:
- Loan sizes from $3 million-$40 million
- 1-2 year term to maturity with up to a year of extensions
- Loan-to-value (LTV) ratio up to 80% for multifamily and industrial; up to 70% for other asset types
- Interest only
- No prepayment penalty
- No minimum debt yield
- No minimum net worth and liquidity
The Short-Term Bridge Loan can be used for a variety of rental and commercial property types, including many types of rental properties and commercial real estate.
The Intermediate Bridge Loan from VCREF
For a longer-term bridge loan, the Intermediate Bridge Loan from VCREF is a great option to consider for temporary financing needs. This loan comes with the following terms and conditions:
- Loan sizes from $5 million-$50 million
- 3-year term to maturity plus up to two 1-year extensions
- As-is LTV up to 80% for multifamily and industrial; up to 70% for other asset types
- Subject to 18 months minimum interest
- Interest only
- Minimum debt yield requirements vary by property type
- Minimum net worth equal to loan amount and liquidity of 10%
The Intermediate Bridge Loan can be used for a variety of property types, but unlike with the Short-Term Bridge Loan, this list does not include condo inventory, condo investment, and single-family rental (SFR) portfolio acquisitions.
Learn More About Real Estate Loan Options from VCREF
Bridge loans are a great solution for investors to consider in a variety of circumstances to help them meet their immediate and long-term business goals. Want to learn more about all things bridge financing? Check out our Bridge Loan Checklist!