People build bridges in order to fulfill a particular need; to cross a river or a canyon, to lay some train tracks. All of the world’s bridges have come about with the purported mission of making life easier by spanning a gap to create a whole. The same can be said of hard money bridge loans, which serve as a key tool for corporate or industrial real estate owners looking to expand, remodel, rebuild or rent.
Bridge loans exist to provide immediate financing when regular banks and other traditional lending institutions won’t. They help owners get the money they need to start or complete a project quickly; this can be key to expanding revenue, but too often, businesses are denied. The inability to get a loan can leave you stranded on one side of an abyss, unable to reach the other side, where your completed project lies. A bridge loan gets you there.
Hypothetical Case Study #1: A Plant That Needs to Grow
For any large industrial plant, the prevailing fear is that they won’t be able to keep up with the times. Needs change, regulations shift, and products fall out of favor. When you are running this kind of plant, you have a responsibility that extends beyond your bottom line. Often, entire communities depend on the local plant for jobs, including the jobs that revolve around the plant (restaurants, mechanics, etc.).
So, when needs change and a plant has to change with them, the situation can be financially perilous. Plant renovations can cost millions of dollars and the owners have to be able to front that money. Traditional lending sources are often wary of investing in such a scenario because the future isn’t as clear.
That’s where hard money, equity-based bridge loans come in. A lender will understand that you are engaged in the long-term process of getting a new product online and out in the market. A bridge loan helps you take control of your plant and reposition it for future growth. This is crucial for any manufacturing, chemical or industrial concern. Bridge loans help you stay flexible and grow.
Hypothetical Case Study #2: Corporate Expansion and Tenant Services
Let’s say you own a company and that company owns its own building. It’s pretty exciting, except that you have a lot of space that you’d like to see developed for tenants. You know you can earn a lot of money renting out your extra space, but there’s a problem: that space isn’t ready yet. Perhaps it isn’t wired properly or it doesn’t have the necessary meeting rooms and cubicles. Maybe it needs a comprehensive cleaning or the lighting needs to be completely redone. You’ll need to figure out the right insurance. Overall, it needs work.
That work is expensive, and you might not have the ability to pay for it immediately. You have inventory, payroll, and other expenses to consider, so you don’t have the liquidity or the right credit. Too many traditional lenders look at this kind of loan as a silly investment or, at the very least, one that won’t immediately pay off. They might got give you money because they don’t see it as part of your core strength. They may look at a balance sheet and say “no.” Of course, it is an expensive job, but wasted space isn’t making any money anyway.
This is another situation where a hard-money bridge loan can help. It is equity-based, and the payment schedule can be tailored to suit your needs. The best part is that the loan is essentially as good as cash; it isn’t dependent on a bank manager dictating what needs to be done.
Businesses, like cities, need to grow. But when they are growing, they come across obstacles— a wide bay or a raging river or an intractable traditional lender. In these situations, you need a bridge. Get started building.
Your real estate assets are your best investments for the future. At Socotra Capital, we’re proud to be the premier direct hard money lender for California real estate. Contact us today to learn more about how we can help.