Commercial Bridge Loans

Like their name implies, bridge loans are used to “bridge the gap” until long-term financing can be secured for the commercial property. In some cases, the lender making the long-term loan will also make the bridge loan on the property. Most bridge loans come with very short terms, typically six months to two years, and many are not amortized (i.e., interest-only payments with a balloon payment at the end). Interest rates on bridge loans are a few percentage points higher than the going market rate.

How easy it is to qualify for a bridge loan will depend on the lender. Most lenders don’t take a one-size-fits-all approach, instead evaluating the unique situation at hand. Because of this, many borrowers will use a bridge loan to renovate a property that wouldn’t qualify for a traditional mortgage before selling it or getting long-term financing. Another advantage of bridge loans is the relatively low down payment requirement–generally between 10% and 20%. For comparison, many traditional commercial mortgages require a 20% to 35% down payment. Bridge loans also close more quickly than conventional real estate loans.