Bridge loans and HELOCs are both common forms of short-term financing loans, typically used by investors to acquire creative loan solutions quickly for their investment projects. When it comes to Bridge loans, we typically see a lot of construction-based projects benefiting the most from them. HELOCs on the other hand, tend to benefit residential land owners looking to expand their real estate portfolio.
Both of these are good options for different business/real estate projects, and even though we’re only speaking about two of the most common ones, there are plenty of more loan options that might be specifically suited for your needs!
We recommend doing a deep dive into our Financial Resource Center to really get a better understanding of what these loans are, who they work for, and how to get the best ones!
Are Bridge loans The Right Option For You?
When understanding if bridge loans are the right option for your business/real estate needs, you have to ask yourself a set of questions that categorize your options.
Some examples of these questions:
- How soon do I need the funding?
- Do I need to use the money for payroll? Construction supplies? Cash flow for business expansion?
- Do I have any connections/networks with private lenders willing to provide me with a personalized loan solution?
Many private hard money lenders advertise their bridge loan programs only for individuals who want to invest in/own real estate properties and expand their portfolios. In reality, bridge loans can (and should) be used for so many different funding scenarios.
Bridge loans are just a type of short-term financing that can be used for any business expense, not just property. It’s most commonly used by borrowers who have a home to use as leverage towards their funding so they manage to get a better loan deal.
But this does not necessarily mean that they have to just use it for real estate purchases/investments.
Many experienced investors use bridge loans to construct, renovate, build, and purchase their property. On top of this, borrowers can use these loans to expand their businesses in any direction they see fit.
When a borrower decides to pursue this type of loan, it’s most important for them to choose the right lender. The private lender they go through will have to be trustworthy, professional, and focused on the success of the borrower's business. We’ll touch on this more in the next sections!
Are HELOCs The Right Option For You?
HELOCs are best explained when you relate them to a credit card. These types of loans are lines of credit that allow you to borrow and repay sums as needed and make minimum monthly payments.
If a borrower wanted to go this loan route, it would be absolutely necessary to have a good credit history as well as an original real estate property that would be used as collateral in case anything went wrong during the loan process.
This type of loan is used by more beginner investors. Still, it does not take away from the fact that it is a very beneficial and profitable option when needing to expand your real estate portfolio specifically.
A HELOC is best known as a convenient and inexpensive method for borrowing money. These loans (just like bridge loans) are short-term financing options used when borrowers and investors need funding quickly and efficiently to “bridge the gap” between their finances.
HELOCs have a variable interest rate. What does that even mean?
Pretty much, the interest rates given on these types of loans are constantly fluctuating over time (both increasing and decreasing) depending on the underlying benchmarks within the market it’s given in.
Similarities and Differences: Bridge Loans & HELOCs
While there are broad similarities between the two loans. Bridge Loans and HELOCs have definite differences that dictate not only who benefits the most from these types of loans but also the requirements between the two loans themselves!
More experienced investors/borrowers with an unorthodox salary style definitely should look into Bridge Loan programs that suit their transactional needs.
Borrowers that are just starting off or don’t have a very expansive and detailed investment portfolio ought to look into HELOC-type loans due to them being more risk avert. They have lower variable interest rates and let you borrow specifically as needed with collateral for even more protection!
What To Look For In A Private Lender
Things to look for in a California private lender:
- Borrowers' Success In Mind
- Fast Approvals and Funding
The most important factor in a California private lender is experience.
There’s no discussion about it, when handling industries like real estate financing, and dealing with risky quick-funded financing solutions like bridge loans and HELOC, it is PIVOTAL that a private lender has many many years of experience.
They know the game better than anyone, and the right one can provide you with a loan that will not only be profitable but will scale for the long-term and create an everlasting relationship between lender and borrower for future transactions.
For example, take a look at the creators of this post. Professional Mortgage Associates have been in the industry for over 30 years, specializing in developing creative loan solutions for all of their borrowers. PMA prioritizes their client's success and doesn’t make loans that are not profitable for their clients!
If you’re ready to go through the loan process and begin expanding your business/cash flow, check out Professional Mortgage Associates' extensive loan program options!