6 Key Factors for Choosing a Bridge Lender for Multifamily and Other Commercial Real Estate

The property seems like it has return on investment (“ROI”) potential. You have a vision. Now all you need is short-term financing to get it market ready with the prospect of producing income. As a commercial real estate developer, you already know that banks, even your local banker, will likely make you go through hoops, burden you with extensive paperwork, and then take several weeks to give you an answer, which could very well be for less than you want. You may even face a flat out “no” if the multifamily property or commercial real estate project doesn’t fully conform to the institution’s parameters. And, in this day and age, how often do projects come without a couple of asterisks attached?

So, you look to private bridge lenders, because, after all, you only need the funds for months, not years. How do you choose who to work with? You need to make the right decision, right now because the clock is ticking— the contract requires you to close quickly, and you have little room for error.

Evaluate bridge lenders upfront and you’re in a better position to get the funds you need, when you need them.

These 6 key factors will help you decide which bridge lender to partner with.

1. Long-term relationship building. Some bridge lenders are purely transactional. To them, every term sheet signing is the end of the story. Other lenders have a more long-term perspective, taking the time to understand how you want to develop. A long-term relationship-building approach benefits both parties. As a developer, the lender provides the fund you need now, and is conceivably there to help you grow your brand, project after project. From the lender’s perspective, working with a repeat client can mean a more streamlined lending process, more open discussions that can lead to creative structuring ideas, and greater confidence in loan repayment.

2. Quick decision making. In talking with a bridge lender, are you talking to someone who’s like an order taker or are you talking to someone who’s a real decision maker? If you need funds fast, an intermediary will only slow things down as your application runs through layers of management. And the further you are from the decision makers, the more likely it becomes like a game of telephone and the greater the potential for errors. No one can present your case better than you, so talk directly to the people who can ask all the questions to inform a decision, and have the power to execute.

3. Readily deployable money. Ask a lender where the funds for your loan come from. Do they have it on hand or will they have to raise? Raising takes time. It may also mean they come up short, and you may not get the amount you need right away. A bridge lender with its own fund and dedicated capital generally isn’t chasing money. They typically have discretionary capital or access to capital, and can readily deploy it.

4. Experience. Our principals have been in real estate for decades. We know, just like you, rarely does a commercial real estate project come tied up nicely with a bow on top. It’s great when it does, and funding those projects is fairly straightforward. But what happens when your project is complex or unusual? Find out if the bridge lender has the experience and appetite to understand what you’re doing, and the ROI potential it presents. Can they think, like you, outside the box?

5. Flexibility. Life happens, and not everything may go according to plan. Some bridge lenders panic as soon as there’s a hurdle. Others tap into vast hands-on knowledge and can, therefore, look ahead. A bridge lender that sees the potential in your project and is flexible, will work with you, whether it’s extension options, accordion features, or other financing tools. It’s likely, they’ll also be proactive, tapping into their deep network to help you remedy an issue from environmental to zoning should one arise.

6. Lack of bureaucracy. There are things that some bridge lenders require that have very little to do with the type of loan you want. They have a pre-baked process and you have to follow all the steps regardless. Do you really need to deposit funds into their institution to qualify for a loan—and tie up even more of your cash? Does that make sense? Are they federally or state licensed and have to comply with a laundry list of regulations? That’s more paperwork, more time. A private bridge lender will have a process that makes sense for you and them. Yes, they have to answer to an authority—their investors. So, look for a bridge lender with an institutional approach that’s tailored to the needs of developers, and knows how to quickly execute due diligence.

A bridge lender that’s dedicated to commercial real estate developers

Understanding the world of multifamily and other forms of commercial real estate development is not in every bridge lender’s wheelhouse. At Fairbridge, our people and processes are designed to meet the needs of originators, because our leaders were real estate developers, owners, and operators before they were lenders. Our principals have decades of experience across finance, real estate, law, loan structuring, and portfolio management so we can spot potential in even the most complex scenarios, and we bring a proactive mindset to working through obstacles that would unnerve other financers.

We believe in nurturing long-term relationships and have developed a strong base of repeat borrowers.. You talk to decision makers who have capital that’s ready to deploy. And, as a private asset-based lender, our institutional approach is streamlined and structured to the specific needs of originators, while providing assurance to our investors.

To learn more about Fairbridge’s approach to bridge loans and our commitment to support commercial real estate developers, reach out and talk to a decision maker or visit fairbridgellc.com.

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