Bridge Loans Explained: Short-Term Commercial Financing

Bridge loans are short-term financing instruments designed to bridge the gap between an immediate capital need and a longer-term financing solution. In commercial real estate, bridge loans are commonly used for acquisitions, repositioning, lease-up periods, and situations where a property doesn't yet qualify for permanent conventional financing.

Bridge loan terms typically range from 6 to 36 months, with interest rates higher than conventional permanent debt but lower than hard money or mezzanine financing. Loan-to-value ratios typically range from 65% to 80% depending on property type, condition, and borrower strength. Most bridge loans are interest-only during their term.

The key to successful bridge financing is a clear exit strategy. Lenders want to understand how and when the loan will be repaid, whether through refinancing into permanent debt, property sale, or business plan completion. Strong exit strategies include stabilized property refinancing, contracted sale, or lease-up to a target occupancy that triggers permanent loan qualification.

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