What Is a Bridge Loan?

A bridge loan is a short-term commercial real estate loan designed to help investors and business owners finance properties that are not yet eligible for permanent financing. Bridge loans are commonly used when timing, property condition, or cash flow prevents immediate qualification for long-term commercial or DSCR loans.

Unlike traditional commercial mortgages, bridge loans are temporary by design. They are intended to support a defined transition period—such as renovation, lease-up, or repositioning—before the borrower exits the loan through refinancing or sale.

Bridge loans are widely used in commercial real estate, multifamily investments, and value-add projects.

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How Bridge Loans Work

Bridge loans focus primarily on the property, the business plan, and the exit strategy, rather than long-term borrower income.

Key characteristics include:

• Short loan terms, typically 12 to 36 months

• Asset-based underwriting, centered on property value

• Flexible structures for transitional scenarios

• Interest-only payments in many programs

Because bridge loans are short-term, lenders emphasize the feasibility of the borrower’s plan and the likelihood of a successful exit.

When Bridge Loans Are Commonly Used

Bridge loans are ideal for situations where permanent financing is not immediately available.

Transitional Property Acquisitions

Properties that require renovation, repositioning, or operational improvements before qualifying for long-term financing.

Value-Add Investment Strategies

Funding improvements that increase rental income, occupancy, or overall asset value.

Bridge-to-Refinance Scenarios

Using short-term financing with the intention of refinancing into a DSCR loan or traditional commercial loan once the property is stabilized.

Time-Sensitive Opportunities

Acquiring properties quickly when sellers, auctions, or competitive markets require fast execution.

Bridge Loan Terms and Structures

Bridge loan terms vary based on property type and lender guidelines, but typically include:

• Loan terms ranging from 12 to 36 months

• Loan-to-value (LTV) based on current or as-completed value

• Fixed or variable interest rates

• Extension options in certain programs

• Origination fees and closing costs

Bridge loans are structured for short-term execution, not long-term holding.

The Importance of an Exit Strategy

A clearly defined exit strategy is the most important component of a bridge loan.

Common exit strategies include:

• Refinancing into a DSCR loan

• Refinancing into a traditional commercial mortgage

• Selling the property after renovation or stabilization

• Business cash flow payoff in select cases

Lenders evaluate exit strategies carefully to ensure the loan can be repaid at maturity.

Bridge Loans vs Other Commercial Loan Options

Bridge loans serve a distinct purpose within commercial financing.

• Bridge Loans – Short-term financing for transitional or value-add properties

• DSCR Loans – Long-term financing based on stabilized rental income

• Hard Money Loans – Asset-based lending with higher cost and shorter duration

• Traditional Commercial Loans – Long-term financing based on borrower and property strength

Selecting the right loan depends on the property’s current condition, timeline, and investment strategy.

Benefits of Bridge Loans

Bridge loans provide several advantages for investors and business owners:

• Access to capital for properties that do not qualify for permanent financing

• Flexible underwriting for complex scenarios

• Ability to act quickly on investment opportunities

• Financing aligned with value-add strategies

When used correctly, bridge loans create a path to stronger long-term financing.

Risks and Considerations

Because bridge loans are short-term, they carry additional considerations:

• Higher interest rates than permanent loans

• Short repayment timelines

• Dependence on a successful exit strategy

• Exposure to market or renovation delays

Bridge loans are most effective when used with a conservative plan and realistic timeline.

Frequently Asked Questions About Bridge Loans

Are bridge loans long-term loans?

No. Bridge loans are designed to be temporary and are typically replaced with permanent financing.

Do bridge loans require an exit strategy?

Yes. A defined exit strategy is a core requirement for approval.

Can bridge loans be used for commercial properties?

Yes. Bridge loans are commonly used for commercial and investment properties.

Are bridge loans faster than traditional commercial loans?

Often yes, though timelines vary by lender and project complexity.

Explore Bridge Loan Options

If you are acquiring, renovating, or stabilizing a property and need short-term financing before securing long-term capital, a bridge loan may be the right solution.

Speaking with a commercial loan specialist can help determine whether a bridge loan aligns with your investment strategy and exit plan.

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