Existing Building or Ground Up?
Bridge loans and construction loans both carry short term commercial deals, but they fund completely differently. A bridge loan hands you the money at closing. A construction loan releases it in stages as the work gets done.
The right one depends on whether you are buying and holding an existing property or building and improving one.
How Bridge Loans Fund
A bridge loan funds as a lump sum at closing. Pricing is generally interest only and above bank debt, terms generally run 12 to 24 months, and leverage generally lands at 65 to 80% LTV. You pay interest on the full balance from day one.
Bridge capital suits an existing structure that needs time, not construction. Acquisition and lease up, a light renovation, or a repositioning to permanent loan condition are the common cases. The lender wants a clear exit through refinance or sale.
How Construction Loans Fund (Draws)
A construction loan funds through a draw schedule. The lender releases money in stages as completed work is inspected, and you pay interest only on the amount drawn, not the full commitment. That keeps early carrying costs low while the project ramps.
Pricing is often similar to bridge debt, frequently floating at Prime plus a spread, with terms that generally run 12 to 24 months. Lenders size to loan to cost, frequently up to 80 to 85% LTC, and require a detailed budget, plans, and a qualified general contractor before they commit.
Timing, Draws, and Cost Comparison
The key differences:
- Funding: bridge lump sum at close, construction released in draws
- Interest: bridge on full balance, construction only on drawn funds
- Use: bridge for existing property, construction for ground up or heavy rehab
- Leverage: bridge generally 65 to 80% LTV, construction generally up to 80 to 85% LTC
- Term: both commonly 12 to 24 months
- Requirements: construction needs budget, plans, and a general contractor
When to Choose a Bridge Loan
Choose a bridge loan when the building already stands and your plan is about time, not construction. Buying a property with below market leases, waiting out a lease up, or fixing a minor issue before a permanent refinance all fit a bridge loan.
If the work is cosmetic or the property is stabilized enough to hold as is, the simpler lump sum structure beats the paperwork of a draw schedule.
When to Choose a Construction Loan
Choose a construction loan when you are building from the ground up or doing a heavy renovation that changes the structure. The draw schedule means you only pay interest on what you have spent, which keeps costs down through a long build.
It is the right tool when you have plans, a budget, and a contractor ready. Ground up development, a major gut rehab, or an addition all call for construction financing rather than a bridge loan.
How CapitalAx Structures the Right Loan
CapitalAx places both bridge and construction debt across a national platform of more than 350 lenders. We look at your plan, decide whether a lump sum or a draw structure fits, and quote the option that keeps your carrying cost lowest. We have closed land, hotel conversion, and repositioning deals, so we know how each structure performs from close to exit.