Bridge Financing for Western-Canadian Manufactured Home Dealers and Installers
As a western-Canadian dealer/installer or a home buyer, when you purchase a manufactured home direct from the factory (or from a private seller), in many cases full payment is required before the home can be loaded for trucking. This can be problematic if mortgage financing is funding the new build and those funds are only available AFTER the home is on site and ready for occupancy, as is normally the case. If the factory/seller is able to supply temporary financing or trade credit, that's great and may solve your problem. If the requirement is full payment at the factory gate, this could create a short-term cash shortage issue for the buyer until the mortgage money kicks in after trucking and setup. That problem could potentially be solved by borrowing temporarily from a family member or from a 3rd party via a "bridge loan."
A Bridge Loan is exactly as it sounds, a temporary loan to get you from one place to another, and in this case, your home from one place to another. The cost of the bridge loan is simply considered a necessary project cost.
Whoever provides the bridge loan will likely have some questions. For example, when do they get their money back and what if something goes wrong? Here's a bigger list including some items that you might not have thought about:
- Is there a mortgage approval in place that will fund without issue once the home is delivered and bank-inspected? Have you confirmed this approval if you are a Dealer, or are you just relying on the customer to say it is so?
- Are the required permits in place? (development, building, electrical, gas, septic, etc.)
- Is the foundation for the home and utility services ready for arrival?
- When is the mortgage expected to fund?
- Does the buyer have enough cash for the other development expenses ( foundation and services) to get to the mortgage-funding stage?
- New Home Warranty or equivalent is required by mortgage lenders - does the factory or Dealer offer this?
- Does the trucking company who is hauling the home from factory to the building site have valid cargo insurance that provides for full replacement cost of the home in the event of upset? Have they provided a "valued-bill of lading" before loading, which is required to get full payout?
- Does the trucking company have replacement cost set-up insurance to cover risk during off-loading and set-up at the building site?
- Do you or your contractor/Dealer have "course of construction" insurance to cover the home against loss after offloading and before the homeowner's insurance policy can kick in? (NB: a homeowner insurance policy can only kick in after an occupancy certificate is issued by the local building inspector.)
- Can the homeowner get property insurance as required by their mortgage lender? (Example, no insurance will be offered if fires are burning or an imminent flood risk in your area - no insurance means no mortgage funds.)
- Are there any liens against the home you are buying or the land that need to be discharged first?
If you can answer all these questions, then you have a good handle on the financial risks that might get in the way of a successful new home project.
Bridge Lending Program for Manufactured Homes
Richards Mortgage Group provides short-term / bridge financing to turn-key manufactured home installers (or end-use-customers) in western Canada that are required to pay the factory for their new manufactured home before it can be released for loading and trucking to the building site yet might not have the cash they need when the time comes. When the end-use customer pays your invoice, our bridge loan is then repaid. Knowing that we are available to support your project and help manage risk, you can pursue more opportunities at the same time with less worry about cash-flow.
If you require further information on our bridge financing program, please contact us.
