What is a Bridge Loan?

A bridge loan is a short-term loan used to provide immediate cash flow during a transition period—typically until longer-term financing can be secured or an existing obligation is removed.

In commercial real estate, bridge loans are commonly used in situations such as:

• Property acquisitions where the buyer needs to close quickly but hasn’t yet secured permanent financing.

• Value-add or repositioning deals where the property doesn’t yet qualify for conventional financing due to low occupancy, physical condition, or operational issues.

• Stabilization after lease-up or renovation, with the intent to refinance with long-term debt once the asset is income-producing.

Key characteristics include:

• Higher interest rates than permanent loans due to their short-term nature and higher risk.

• Terms of 6 to 36 months, sometimes extendable.

• Interest-only payments are common.

• Often include exit fees or prepayment penalties.

Bridge loans are frequently used by developers, investors, or sponsors needing flexibility and speed. They are typically secured by the real estate asset itself.