Insights | September 26, 2022
Making a Bridge Loan Part of Your Toolkit for Success in Seniors Housing
In an environment of economic uncertainty, short-term capital or bridge lending, can prove an invaluable tool to meet business goals, especially in seniors housing and senior living. With talks of a recession moving from a whisper to a roar, knowing when to leverage an alternative financing solution can make or break future growth. On the heels of a pandemic, senior living providers are facing staffing shortages, occupancy challenges, and inflationary cost increases. Those factors, set against the backdrop of a possible recession, make bridge loans a timely option.
While it may sound counterintuitive, traditional lending, or bank lending, may not be the best option. Even the soundest of business strategies are sometimes unable to receive traditional financing. Many banks are not interested in lending within seniors housing or senior living, simply because they are less familiar with the product and perceive it to be a more complex or complicated transaction. Anytime a loan request is outside of a lender’s wheelhouse, they are unlikely to pursue it. Couple that with the fact that the credit parameters of lenders traditionally in the seniors housing space are tightening, impacting the existing pipeline of deals and future transactions. Bridge lenders are not bound by those restrictions. In fact, bridge lenders may have more flexibility to offer creative financing solutions.
When time is of the essence, a bridge loan is beneficial in meeting a short or expedited transaction timeline. Short-term capital transactions shine in tight turnarounds, often completed within 45 days or less, compared to an average of 120 days with a bank.
If a senior living owner or operator is exploring a value-add or opportunistic acquisition, those tend to be better suited to bridge financing because the structural requirements of the loan and the regulatory intricacies of the deal may scare off traditional lenders. Interest rates often get outsized attention at the start of a financing journey. While bridge loan interest rates are higher than traditional bank rates, don’t discount the opportunity solely on that premise. It is often more costly to lose a lucrative deal than if you proceed with a bridge loan at a higher rate. Once the stabilization of a facility or community is achieved, it becomes that much easier to obtain permanent, lower-cost, longer-term traditional financing.
In any transaction, the goal is to always enhance operations, occupancy, revenue, and amenities. That goal can take on different forms from a building refresh and rebrand to creating acuity-level transitions within an existing building’s footprint. In tumultuous times of economic uncertainty, access to short-term lending is an integral tool in a savvy owner or operator’s financial toolkit.
As traditional lenders tighten their credit expectations and lending parameters, explore bridge financing as a smart and sound strategy to continue to achieve strategic business objectives. Learn more about our seniors housing bridge loan program here that provides creative financing solutions for assisted living, independent living, continuing care retirement communities (CCRCs), life plan communities, memory care and long-term care facilities. Build your bridge to profitability today.
Wilshire Finance Partners is a real estate finance and investment company specializing in bridge loans and capital solutions for senior living and healthcare from $1 million to $10 million nationwide.