Most real estate transactions require leveraged financing in the form of a loan. Banks are the place most people think of to get traditional loans. However, the many issues impacting lending since 2008 have put a cramp on what many traditional banks can do.
Bridge loans are meant to solve problems. getting a bridge loan often means positioning capital in such a way as to help borrowers overcome problems and ultimately become successful.
Private commercial bankers who provide bridge loans are typically well capitalized by money that came out of wall street to avoid the beatings and inevitable blood bath that will occur there. Hedge funds, pension plans, 401K's, and even family offices depend on private investment bankers to find solid investment opportunities and make loans to.
Private institutional capital replaces more traditional deposit-type bank money in cases where traditional banker's money doesn't like to go. For example, "deals with hair on them" are not attractive to traditional banks. Traditional banks have depositor's money to protect. They have strict underwriting guidelines that are, in some cases, legislated in order to protect the ordinary consumer.
Private institutional lending costs more that traditional financing. They take bigger risks. They also tend to produce greater rewards.
In a yield starved Wall Street environment, where yields are rarely ever into double digits (especially after all broker-type fees are removed), direct investment into commercial real estate through the private commercial investment banking system, allows "smart money" to get closer to the kind of performance they want their money to produce.
Bridge lending is typically a temporary loan (up to three years) that allows a project to get off the ground and into cheaper, more traditional finance down the road. A property that is 50% occupied, for example, generally can't get financing through traditional channels. Private bankers will make the loan, provide around 65% of the capital needed to turn a project around, and then get out once occupancy is back up to performing levels.
MLC Capital Partners is a private financing firm that provides bridge lending for commercial property in each of the continental United States. Visit us at http://MLCcapitalpartners.com to check out our tear sheet or request a commercial loan.