Bridging the Gap to Permanent Profitability
A Bridge Loan is a short-term, specialized financing tool designed to “bridge the gap” between immediate cash needs and the eventual acquisition of long-term (permanent) financing.
These loans are fast, flexible, and essential for investors who need to quickly secure a property, finance renovations, or cover operating costs while they stabilize an asset. If you need speed, flexibility, and a high Loan-to-Value (LTV) ratio, a bridge loan is often your best option.
Key Features of Bridge Financing
Bridge loans are defined by speed and adaptability, making them different from a standard bank loan:
Short Terms
The loan term is typically short, ranging from 6 months to 3 years. The expectation is that the borrower will execute their business plan and then refinance into a permanent loan before maturity.
Speed to Close
The underwriting process is faster because the lender focuses more on the asset's potential and less on the borrower's historical cash flow. You can often close in as little as 10 to 30 days.
Flexible Use of Funds
Funds can be used not just for the purchase, but also for capital expenditures, repositioning costs, or covering debt service during a lease-up period.
Higher Leverage
Bridge lenders may offer higher leverage on non-stabilized assets compared to conventional lenders. They often look at the After-Repair Value (ARV) of the property.
Interest-Only Payments
Payments are often Interest-Only, which keeps monthly carrying costs low while the property is being improved or is vacant.
When to Use a Commercial Bridge Loan
A Bridge Loan is specifically designed for situations where time is critical or the property is not yet ready for conventional financing:
| Scenario | Goal & Benefit |
|---|---|
| Acquisition | You need to close a purchase quickly to beat other bidders or meet a tight contract deadline. |
| Value-Add Property | The property needs significant renovations or repositioning (e.g., new roof, interior upgrades) before it can command higher rents. |
| Lease-Up Phase | The property is newly constructed or recently vacated, and you need capital to cover expenses while you secure new tenants and establish consistent cash flow. |
| Avoiding Prepayment Penalties | You want to refinance a current loan but must wait for the prepayment penalty period to expire. |
Important Considerations
Higher Interest Rates
Exit Strategy is Key
Origination Fees
These loans often carry higher origination fees (points) than conventional loans.
Bridge the Gap to Your Next Investment
Don’t let a temporary challenge stop a long-term opportunity. Our Bridge Loan specialists can quickly assess your asset’s potential and structure a financing plan that gets you to closing fast.
Speak to an expert about using a Bridge Loan to maximize your property’s value.