What is Bridge Financing? |
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Bridge Financing is used to maintain liquidity while waiting for an anticipated and reasonably expected inflow of cash, such as when the cash flow from a sale of an asset is expected after the cash outlay for the purchase of another asset. For example, when selling property, the owner may not receive the cash for 90 days, but has already purchased a new property and must pay for it in 30 days. Bridge financing covers the 60 day gap in cash flows. Bridge loans are often used for commercial real estate purchases to quickly close on a property, retrieve real estate from foreclosure, or take advantage of a short-term opportunity in order to secure long term financing.
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What is a Mezzanine Loan?
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Mezzanine Loans can be subordinated debt or preferred equity instruments that represent a claim on a company's assets which is senior to the claims of a company's common shareholders. In real estate finance, mezzanine loans are often used by developers to secure supplementary financing for development projects. These loans are collateralized by the stock of the development company rather than the developed property itself. Standard mortgage foreclosure proceedings can take more than a year, but stock is a personal asset of the borrower and legal seizures can occur in just a few months.
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What is an Unsecured Business Line of Credit?
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Unsecured Business Lines of Credit depend on personal and business credit history and requires that the business has been operational for at least two years. They are available for individual business owners with credit scores of 680 and above. Amounts can range from $50,000 to $400,000 and the pledge of personal residence or business assets is not required. Full documentation such as tax returns and financials is usually not required. These lines of credit extend for four to seven years and are provided at rates between Prime and Prime +5.
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What is a Secured Corporate Line of Credit?
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Secured Corporate Lines of Credit are low interest credit lines that are LIBOR-based or based on Prime or Prime plus a small margin and are secured by receivables, inventory or other business assets. They can be obtained for amounts between $400,000 and $10 million. Full documentation is required, including two years business and personal taxes, a Personal Financial Statement and an Accounts Receivables Aging Report. This financial product can be used to remove existing business liens from residential properties and attach those liens to the business.
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What are Medical Professional Loans?
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Medical Professional Loans from $30,000 to $400,000 are available for medical and dental professionals in practice for two years or longer. These can be unsecured business loans or lines of credit in the business name with excellent interest rates that typically start at Prime and depend on credit history.
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What are Business Acquisition Loans?
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Business Acquisition Loans can be used to fund the purchase of existing businesses or franchises ranging from $250,000 to $2 million. Down payments up to 20% (15% up to $750,000), a 650 credit score and previous industry experience are required. The interest rate is Prime + 2.75%.
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What are Business Equipment Loans?
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Business Equipment Loans are sale-leaseback transactions that provide cash for equipment that is already owned. This equipment can still be utilized in the operation of the business for a monthly payment. Available amounts range between $25,000 and $250,000. A 650 credit score and 3 months business bank statements are required. The business owner receives 50% - 80% of the equipment's value.
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What are Unsecured Restaurant Loans?
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Unsecured Restaurant Loans are available with no minimum credit requirements. These enterprises must be in business for at least six months and must be projected to do at least $360,000 in annual revenue. The only requirements are three months business bank statements and the most recent credit card processing statement to prove revenues.
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Why Is There a Need for These New Financial Products?
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The recent changes and upheavals that have been experienced in the domestic and world-wide economic and financial marketplaces make new sources of business financing absolutely necessary. Previous funding sources are no longer capable of providing financing to qualified applicants. The effects of the current crisis, initiated by the mortgage and real estate meltdowns dictate that we identify unique, new sources of financing for commercial applicants.
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Will The Economic and Financial Crisis Eliminate These Products?
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The existence of these new products is based on the impact of the crisis that has evolved. Our society is simply shifting its emphasis from previous types of funding apparatus to alternative methods of financing.
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How Will These Products Affect An Individual Business Owner’s Credit?
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These products are overwhelmingly tied to the business or commercial entity itself and, therefore, do not impose any additional restrictions on the personal credit of the business owner. Actually, utilization of these measures and products increase the credit-worthiness of the individual owner.
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What Fees Are Involved?
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Obviously, there will be fees paid whenever funding is obtained. These fees are typically a percentage of the funds secured and that amount will vary depending upon specifics of the individual situation, the type of financing acquired, the credit-worthiness of the individual, the project risk and the state of the market at the time of funding.
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Are There Application Fees?
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In individual situations, there will be application fees charged, as well as commitment fees, in some cases.
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What Are The General Credit Requirements for These Financial Products?
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Generally speaking, the better the credit score of the applicant, the greater the success potential for the funding and the greater likelihood that fee percentages and interest rates will be less. However, this is not a given and each individual situation must be evaluated in light of its own merits.
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How Long Does The Application Process Take?
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There are no set rules for actual time frames. Each transaction will take as long as necessary for appropriate due diligence to be performed and documentation to be presented as required.
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What Are The Maximum Loan Amounts?
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Maximum loan amounts vary from product to product. Equipment Leasing transactions can reach $50 million plus, Unsecured Lines of Credit are usually limited to about $400,000, Corporate Lines of Credit extend to $10 million, Equity/Debt Financing amounts can reach well over $250 million and Project Financing can be as high as $5 billion.
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What Are the Benefits of Tax Credit Analysis?
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Tax Credit Analysis reduces the amount of funding necessary for domestic U.S. transactions because federal, state and municipal taxing authorities may provide tax credits and rebates for projects within their jurisdictions or territories. This reduction in funding requirements may increase the success potential of the funding project by decreasing the funding amount required or by certifying the interest of government entities.
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