If you’re at all familiar with the Small Business Administration, then you already understand that financing and the risk of being a lending partner can be pretty substantial. However, with Florida bridge loans as an option, businesses have far more capability to borrow what they need to take care of business. These bridge loans are specifically related to the SBA 504 loan program, and they’re an innovative tool that can be helpful to lending partners and businesses alike.
Understanding How 504 Bridge Loans Work
Traditionally, a 504 loan requires a commercial lender to finance 50% of the loan, then the SBA or an SBA partner will finance 40% of the loan. This leaves the borrower with a requirement to fund 10% as a down payment. The amount of financing has never been a critical issue, but what does typically cause a problem is the timeline from closing the loan with the commercial partner to transitioning to the financing from the SBA.
The bridge loan is a short-term loan that fills that gap between the initial lender funding their loan and the time it takes the SBA to fund their portion of the loan. This allows the full 90% of funds to be available to the borrower upfront, rather than having the extended waiting time that puts the commercial lender at risk and the borrower in a tight situation.
The benefit of this bridge loan is that lenders and borrowers don’t necessarily have to do anything extra special to make it work. The bridge loan provides interim financing and is paid off via the funds of the SBA loan portion when it gets funded. It just takes the waiting out of the process.
When to Consider a Florida Bridge Loan
It is very important to know when a bridge loan is appropriate and when it truly is an SBA bridge loan. Remember that these serve a very specific purpose: to help bridge the timing gap for an SBA loan portion. The lenders who offer bridge loans are going to be SBA partners and commercial lenders. You shouldn’t have to complete an expensive secondary loan that puts more of a financial strain on your business.
A bridge loan can be a great tool when there is more risk in a loan or when the borrower needs quick access to the full 90% of the funds. Work closely with your lender to understand the details and terms of using such a loan.
Florida bridge loans can be a great tool for commercial lenders and commercial borrowers to fill the financing gap. Understand the differences between this partner bridge loan and costly alternatives that are not SBA bridge loans. Your business may need the other type of bridge loan, but you don’t want to have any misconceptions about what you are seeking or using.
The SBA bridge loan is meant to be a tool that reduces the risk for lenders and ensures businesses get the financing they need when they need it.
