Bridge finance, mezzanine and hard money are finance options for short term, creative finance … if you need fast finance. We can help.
Bridge financing is to be used as a ‘bridge’ to permanent finance. Often needed for construction projects, where the client needs funds to acquire the land, develop the plan, or to start construction while waiting for the construction loan to be approved. Short term financing like a bridge loan is necessary. You may find yourself in need of a bridge loan if you unexpectedly lose a source of funding but still need money to close a transaction.
Whatever the reason, we can help guide you through the process of securing a bridge loan.
A mezzanine is similar to a bridge loan except it usually comes as part of a second mortgage or equity position. It is a hybrid of debt and equity financing, which can be used to finance the expansion of an existing company. Mezzanine financing is basically debt capital that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. It is generally subordinated to debt provided by senior lenders such as banks and venture capital companies.
A mezzanine lender looks at the individual project considering a number of factors ahead of taking a higher risk position, so they feel more comfortable. Most condo conversions use mezzanine as the primary finance option.
Since mezzanine financing is usually provided to the borrower very quickly with little due diligence on the part of the lender and little or no collateral on the part of the borrower, this type of financing is aggressively priced with the lender seeking a return in the 20-30% range.
Mezzanine financing might be right for you as it is treated like equity on a company’s balance sheet and may make it easier to obtain standard bank financing.
Hard Money Loans
Hard money is the most well-known form of short-term funding and it is equity driven. A hard money lender will typically lend up to 65% of the appraised value.
Typically, investors use hard money to acquire run-down properties, mismanaged buildings with poor cash flow, buy and flip type of transaction or to restructure a business. Often Hard Money Loans are used to help fund deals that other lenders don’ t want to get involved in.