Transitional Financing
For more than four decades, First National has originated, underwritten, closed and serviced commercial bridge loans. As a Principal Lender, First National provides its own capital, conducts its own underwriting and makes its own lending decisions.
A bridge loan should provide sufficient time and capital for a borrower to execute a credible business plan and reach an identifiable exit.
First National therefore evaluates both the real estate securing the loan and what is expected to occur during the bridge period.
First National considers bridge financing for qualified commercial real estate transactions, including acquisitions, capital improvements, debt consolidation and other appropriate transitional financing requirements.
Minimum Loan Amount: $7 million
Typical Loan Size: $10 million to $15 million
Typical Loan-to-Value: Approximately 60%
Available Terms: 12, 24 or 36 months
Bridge loans are generally structured on an adjustable-rate basis and, depending upon the transaction, may include interest-only or accruing-interest provisions.
First National prefers properties located in or near major metropolitan markets.
Every transaction is individually underwritten. Final terms and structure depend upon the property, sponsorship, collateral, business plan, exit strategy and other underwriting considerations.
Bridge financing may be appropriate when an acquisition is not yet positioned for conventional long-term debt.
First National may consider:
First National may consider bridge financing when substantial improvements are part of a defined business plan.
Underwriting may include:
Substantial improvement advances may require supporting documentation and third-party review of completed work.
First National may consider debt consolidation when it creates a coherent capital structure and a clear repayment strategy.
The review may consider:
Multiple obligations alone do not establish the basis for a bridge loan.
Preparing for bridge financing starts with understanding what a lender will evaluate. Our complimentary guide covers the exit strategy, the business plan for the bridge term, borrower equity, carrying costs and First National’s published bridge program parameters.
It also outlines the initial package to help you organize the information typically needed before starting a financing conversation.
Owners, purchasers and qualified sponsors seeking short-term commercial real estate bridge financing may contact First National to discuss a proposed transaction.
As a Principal Lender, First National combines its own capital with more than four decades of commercial real estate lending, underwriting, closing and servicing experience.
The most important question in bridge lending is not simply why the borrower needs short-term capital.
It is what will be different when the bridge loan matures.
A property may require time to complete capital improvements, execute a leasing program, improve operations, complete an acquisition strategy, resolve an existing capital-structure issue or otherwise reach a condition that supports longer-term financing or another credible repayment source.
First National seeks to understand the specific events expected to occur during the bridge period.
A credible bridge request should answer three questions:
The stronger the connection among those three elements, the more understandable the bridge transaction becomes from a credit perspective.
The exit strategy should not be treated as something to consider near maturity.
It is part of the original bridge-loan analysis.
Potential exits may include permanent financing, a sale of the property, refinancing following completion of improvements, refinancing after improved operating performance or another clearly identified source of repayment.
First National may consider what must occur for the proposed exit to become realistic.
A 12-, 24- or 36-month loan term gives the borrower time, but the passage of time by itself does not improve a property.
Value is generally created or preserved by executing a business plan.
First National therefore seeks to understand what actions will occur during the bridge term, who will execute them, how much they will cost and how they will be funded.
A bridge loan supported primarily by the expectation that market conditions will simply improve presents a different credit profile from a loan supported by identifiable actions under the borrower’s control.
The short duration of a bridge loan does not eliminate the importance of borrower equity.
First National considers the sponsor’s investment, the property’s value and the complete capitalization of the transaction.
For acquisitions, the lender may consider the actual cash being invested by the borrower together with the purchase price and independently determined value.
For existing properties, First National may consider the borrower’s existing equity position and any additional capital required to complete the proposed business plan.
Borrower equity helps align the sponsor’s economic interest with successful execution of the bridge strategy.
A bridge loan is short-term financing intended to provide capital during a defined transitional period before a property reaches its next financing, operating or ownership stage.
First National’s minimum bridge loan amount is $7 million. Typical bridge loans are approximately $10 million to $15 million, although every transaction is individually evaluated.
First National considers 12-, 24- and 36-month bridge loan terms.
First National’s typical bridge loan-to-value is approximately 60%, subject to underwriting and the individual transaction.
Bridge loans are generally structured on an adjustable-rate basis.
A bridge loan is short-term financing intended to provide capital during a defined transitional period before a property reaches its next financing, operating or ownership stage.
First National’s minimum bridge loan amount is $7 million. Typical bridge loans are approximately $10 million to $15 million, although every transaction is individually evaluated.
First National considers 12-, 24- and 36-month bridge loan terms.
First National’s typical bridge loan-to-value is approximately 60%, subject to underwriting and the individual transaction.
Bridge loans are generally structured on an adjustable-rate basis.
Depending upon the transaction, a bridge loan may include an interest-only or accruing-interest structure.
First National may consider bridge financing for acquisitions, capital improvements, debt consolidation and other qualified transitional financing requirements.
A bridge loan has a defined maturity. First National therefore evaluates how the borrower expects to repay the loan and what must occur during the bridge period to make that repayment strategy credible.
First National generally prefers bridge-loan collateral located in or near major metropolitan markets. Each transaction is evaluated individually.
Any appraisal relied upon by First National in making its lending decision is ordered directly by First National.
