In commercial real estate, the best deals rarely wait for traditional financing timelines. A bridge loan gives real estate investors the short-term capital they need to move quickly on acquisitions, stabilize properties, or transition to permanent financing—without losing momentum on time-sensitive opportunities.
This guide breaks down how bridge loans work, when they make sense, and what experienced investors should know before pursuing this financing strategy.
What Is a Bridge Loan?
A bridge loan is a short-term financing solution—typically 6 to 24 months—designed to "bridge" the gap between an immediate capital need and a longer-term exit, whether that's a sale, refinance, or permanent loan.
Unlike conventional mortgages that can take 60 to 90 days (or longer) to close, bridge loans are structured for speed. Many lenders can fund within two to four weeks, and some close even faster for experienced borrowers with strong collateral.
Bridge loans are asset-based, meaning approval depends primarily on the property's value and the strength of your exit strategy—not just your personal income documentation or credit score.
How Bridge Loans Differ from Conventional Financing
Understanding the distinction between bridge financing and traditional loans helps investors choose the right tool for each situation.
Timeline: Conventional commercial loans often require extensive documentation, committee approvals, and 45-90 day closing windows. Bridge lenders prioritize speed, with many transactions closing in under 30 days.
Underwriting approach: Banks focus heavily on borrower financials—tax returns, debt-to-income ratios, and credit history. Bridge lenders emphasize the asset itself: current value, after-repair value (ARV), cash flow potential, and your plan to exit the loan.
Loan structure: Bridge loans typically feature interest-only payments during the term, with a balloon payment at maturity. This preserves cash flow during the hold period while you execute your business plan.
Flexibility: Bridge financing accommodates scenarios that conventional lenders often decline—properties needing renovation, assets in lease-up, borrowers with complex income situations, or deals requiring fast execution.
When Real Estate Investors Use Bridge Loans
Bridge financing isn't right for every deal, but it excels in specific situations where speed, flexibility, or unconventional circumstances make traditional financing impractical.
Acquisitions in Competitive Markets
When you're competing against cash buyers or need to close quickly to secure a deal, bridge financing lets you move with confidence. Sellers favor buyers who can execute without financing contingencies or extended due diligence periods.
Value-Add and Repositioning Projects
Properties requiring significant renovation, lease-up, or operational improvements often don't qualify for permanent financing until they're stabilized. A bridge loan provides capital to acquire the asset, complete improvements, and achieve the occupancy or income levels required for long-term financing.
Construction Completion or Lease-Up
If you're acquiring a property mid-construction or with significant vacancy, bridge financing can carry you through the completion and stabilization phase until the asset qualifies for permanent debt.
Refinancing for Liquidity
Investors sometimes use bridge loans to pull equity from existing properties quickly—whether to fund a new acquisition, cover capital expenditures, or address a time-sensitive cash need.
Portfolio Transactions
When acquiring multiple properties simultaneously, bridge financing can provide the speed and flexibility needed to close a portfolio deal, with the option to refinance individual assets into permanent loans over time.
Key Terms and Structure
Before pursuing a bridge loan, investors should understand the typical terms and how they affect overall deal economics.
Loan-to-Value (LTV): Most bridge lenders offer 65% to 75% of the property's current value, though some will lend up to 80% for strong borrowers and assets. For value-add deals, lenders may also consider loan-to-cost (LTC) or a percentage of the after-repair value.
Interest rates: Bridge loan rates are higher than permanent financing—typically ranging from 8% to 12% depending on the lender, property type, borrower experience, and overall risk profile. Rates are often quoted as a spread over a benchmark rate or as a flat percentage.
Term length: Most bridge loans run 12 to 24 months, with extension options available for an additional fee. Some lenders offer shorter terms (6 months) for quick-turn projects.
Points and fees: Expect to pay 1 to 3 points at origination, plus standard closing costs. Some lenders also charge exit fees or extension fees.
Prepayment: Many bridge loans allow prepayment without penalty after an initial lockout period (often 3 to 6 months), giving you flexibility to exit early if your business plan accelerates.
Recourse: Bridge loans may be full recourse (personal guarantee required), partial recourse, or non-recourse depending on the lender and deal structure.
Exit Strategy: The Most Critical Factor
Lenders evaluate bridge loan requests primarily through the lens of your exit strategy. Before you apply, be prepared to clearly articulate how you'll repay the loan:
Sale: You plan to sell the property before the loan matures, using sale proceeds to repay the bridge debt.
Refinance: You'll transition to permanent financing—whether conventional bank debt, CMBS, agency (Fannie Mae/Freddie Mac for multifamily), or a DSCR loan—once the property is stabilized.
Cash payoff: Less common, but some investors plan to repay with cash from other sources.
The stronger and more credible your exit, the better your terms. Lenders want to see realistic timelines, market support for your assumptions, and contingency plans if your primary exit encounters delays.
Choosing the Right Bridge Lender
Not all bridge lenders are created equal. The right partner depends on your deal type, timeline, and relationship preferences.
Debt funds and private lenders often provide the fastest execution and most flexible terms, but may charge premium pricing.
Banks and credit unions occasionally offer bridge products with lower rates, but typically require stronger borrower credentials and longer timelines.
Correspondent lenders and advisors can help you access multiple capital sources, negotiate competitive terms, and structure deals that align with your specific objectives.
When evaluating lenders, consider not just rate and leverage, but also:
- Speed and certainty of execution
- Transparency on fees and closing costs
- Flexibility on extensions and modifications
- Experience with your property type and market
- Reputation among other investors and brokers
Risks and Considerations
Bridge loans are powerful tools, but they carry risks that sophisticated investors should weigh carefully.
Higher cost of capital: Interest rates and fees are significantly higher than permanent financing. Build these costs into your underwriting to ensure the deal still pencils.
Maturity risk: If your exit strategy doesn't materialize—the property doesn't sell, or you can't secure permanent financing—you may face costly extensions, forced sales, or worse. Always stress-test your timeline assumptions.
Market risk: Changes in interest rates, cap rates, or local market conditions can affect both your exit value and your ability to refinance.
Execution risk: Value-add projects carry construction and lease-up risk. Budget conservatively and build in contingencies.
Is a Bridge Loan Right for Your Next Deal?
Bridge financing is ideal for experienced investors who need speed, have a clear exit strategy, and are comfortable with short-term, higher-cost capital. It's not a substitute for permanent financing—it's a tactical tool that enables you to capture opportunities that would otherwise slip away.
If you're evaluating a potential acquisition, repositioning project, or refinance that requires faster execution than traditional lenders can provide, a bridge loan may be the right solution.
Ready to Discuss Your Bridge Financing Needs?
Brookmont Capital Ventures structures bridge loans and short-term financing for real estate developers and investors nationwide. We work with debt funds, private lenders, and institutional capital sources to find competitive terms aligned with your business plan.
Brookmont Capital Ventures is a capital advisory firm. We do not provide direct lending services. All financing is subject to lender approval and underwriting.