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Why a Bridge Loan?
There are several reasons a borrower might look to a bridge loan, from the need to close a deal in a short period of time to a desire to take advantage of a limited-time business opportunity. Working capital can be an issue at this level, and there are some situations where reputable borrowers might nonetheless fail to qualify for a traditional institutional commercial loan. A bridge loan is also commonly used because the property itself is not stabilized. There is a value-add component to the deal itself. Once stabilized the property can be refinanced at the new “stabilized value” allowing the sponsor to pay back investors and roll that equity into the next deal.