A bank loan is traditional commercial real estate financing from a depository institution, offering lower rates and longer terms but requiring stabilized properties, strong borrower credit, and extensive documentation. A bridge loan is short-term financing from a non-bank lender or debt fund, trading higher rates for speed, flexibility, and the ability to finance transitional or value-add assets that banks will not touch.
Quick Comparison
Key attributes side by side.
| Attribute | Bank Loan | Bridge Loan |
|---|---|---|
| Position in Capital Stack | Senior secured (first lien) | Senior secured (first lien) |
| Security / Collateral | First mortgage + personal recourse guarantees | First mortgage; often non-recourse with carve-outs |
| Typical Term | 5-10 years (sometimes 25-30 year amortization) | 12-36 months with extension options |
| Cost / Rate Range | 5.5-7.5% with minimal fees | 8-12% + 1-2 origination points |
| Risk Profile | Low cost but recourse; personal guarantee risk | Higher cost but often non-recourse; maturity risk |
| When to Use | Stabilized assets, long-term holds, relationship banking | Transitional assets, time-sensitive closings, value-add plans |
| Foreclosure / Remedy | Mortgage foreclosure + personal guarantee enforcement | Mortgage foreclosure; non-recourse limits personal exposure |
In Depth
Bank loans are traditional commercial real estate financing provided by depository institutions — commercial banks, savings institutions, and credit unions. Banks offer some of the lowest interest rates in CRE lending (5.5-7.5%) because they fund loans through deposits, which have a very low cost of capital. However, banks are heavily regulated and must follow strict underwriting guidelines.
To qualify for a bank loan, the property must typically be stabilized with strong occupancy (85%+), the borrower must have excellent credit and substantial net worth, and the loan must meet the bank's debt service coverage ratio and LTV requirements. Banks also require extensive documentation: tax returns, personal financial statements, rent rolls, operating statements, environmental reports, and appraisals. Closing timelines are 60-120 days.
Most bank CRE loans are recourse, meaning the borrower personally guarantees the debt. If the property value declines and the bank suffers a loss, they can pursue the borrower's personal assets. Banks also tend to be conservative on loan proceeds, typically lending 60-70% LTV. These loans are best suited for stabilized properties held by financially strong borrowers who prioritize low cost of capital.
In Depth
Bridge loans are provided by non-bank lenders — private debt funds, specialty finance companies, and institutional capital sources — that operate outside the banking regulatory framework. This allows bridge lenders to be more flexible in their underwriting, accept transitional assets, and close faster than banks.
Bridge loans carry higher rates (8-12%) and origination fees (1-2 points) compared to bank loans, but offer several advantages: faster closing (2-4 weeks), higher leverage (up to 75-80% LTV), interest-only payments, and non-recourse structures. Bridge lenders focus on the asset's potential value and the sponsor's ability to execute the business plan, rather than current stabilized cash flow.
Bridge loans are ideal for deals that banks will not finance: value-add acquisitions, properties with below-market occupancy, assets needing renovation, and time-sensitive opportunities where speed of execution determines whether the deal closes. Many sponsors use bridge loans as interim financing before refinancing into a bank loan once the property is stabilized.
Key Differences
Lender type: Banks are regulated depository institutions; bridge lenders are non-bank debt funds and specialty lenders.
Rates: Bank loans cost 5.5-7.5%; bridge loans cost 8-12%.
Speed: Bank loans close in 60-120 days; bridge loans close in 2-4 weeks.
Property requirement: Banks require stabilized assets; bridge lenders finance transitional properties.
Recourse: Bank loans are typically full recourse; bridge loans are often non-recourse with carve-outs.
LTV: Banks lend 60-70% LTV; bridge lenders can go to 75-80% LTV.
Documentation: Banks require extensive documentation; bridge lenders have streamlined processes.
Flexibility: Banks follow rigid credit policies; bridge lenders can structure creative solutions.
Decision Guide
Practical scenarios to help you decide.
Our Role
H Equities provides bridge loans from $5MM to $50MM for commercial real estate transactions that require speed, flexibility, and higher leverage than banks offer. When your deal does not fit the bank box — or when timing is critical — our bridge financing gets the deal done while you work toward permanent bank takeout.
FAQ
Bridge lenders fund from private capital (not deposits), take on higher-risk transitional assets, and offer features like non-recourse structures and faster closings. This is why bridge loans typically carry rates of 8-12% compared to bank loans at 5.5-7.5% — the higher rate compensates for the additional risk and private cost of capital.
Yes. This is a common strategy called "bridge to perm." Sponsors use a bridge loan to acquire and stabilize an asset, then refinance into a bank loan at a lower rate once the property meets the bank's underwriting requirements.
Some larger banks have bridge lending programs, but they tend to be conservative and slow compared to non-bank bridge lenders. Most CRE bridge lending in the market today comes from private debt funds and specialty lenders.
Non-recourse means the lender's remedy in a default is limited to the property securing the loan. The borrower is not personally liable for any deficiency. Most non-recourse loans include "bad boy" carve-outs for fraud, misrepresentation, and environmental liability.
The decision comes down to property condition and timing. If your property is stabilized and you have time (60-120 days), a bank loan offers the lowest cost. If the property is transitional or you need to close quickly, a bridge loan is the right tool.
Related
Tell us about your transaction and we'll help you identify the right financing structure — bridge, mezzanine, preferred equity, or co-GP.