Definition
A commercial real estate bridge loan is a short-term financing instrument designed to provide capital for properties in transition. These loans "bridge" the gap between a property's current state and the point at which it qualifies for permanent, lower-cost financing. Bridge loans are most commonly used when a property is vacant, underperforming, undergoing renovation, or in the process of being stabilized. Unlike conventional bank loans that require stabilized cash flow and lengthy underwriting, bridge lenders focus primarily on the asset's value and business plan. This makes bridge loans ideal for time-sensitive transactions such as acquisitions at auction, value-add repositioning, or rescuing deals with expiring contracts. Interest rates on bridge loans are higher than permanent financing — typically ranging from 8% to 13% — reflecting the shorter duration and higher risk profile. Most bridge loans are structured as interest-only, meaning borrowers pay only interest during the loan term and repay the principal at maturity through refinancing or sale.
How It Works
A borrower identifies a commercial property that needs capital quickly — perhaps a multifamily building that is 60% occupied and needs renovation to reach full occupancy. The borrower approaches a bridge lender, who evaluates the property's current value (as-is value) and its projected value after improvements (as-stabilized value). The lender typically advances 65-80% of the as-is value or 60-75% of the as-stabilized value. The loan closes quickly, often within 2-4 weeks, compared to 60-90 days for conventional bank financing. During the loan term, the borrower executes their business plan — renovating units, leasing up vacancy, improving operations. Once the property is stabilized, the borrower refinances into permanent financing at a lower rate, paying off the bridge loan.
Example
A sponsor acquires a 50-unit multifamily property for $5,000,000. The building is 55% occupied and needs $1,000,000 in renovations. A bridge lender provides a $4,500,000 loan (75% of the $6,000,000 total project cost) at 10% interest-only for 24 months. Monthly interest payments are $37,500. After 18 months of renovations and lease-up, the property reaches 95% occupancy with an NOI of $480,000. At a 6.5% cap rate, the stabilized value is approximately $7,400,000. The sponsor refinances into a permanent loan at 6% interest, pays off the bridge loan, and retains significant equity upside.
Why It Matters
Bridge loans are the engine behind most value-add and opportunistic real estate strategies. Without them, investors would miss time-sensitive acquisitions and be unable to fund the transitional period before a property qualifies for permanent financing. For sponsors executing repositioning business plans, bridge loans provide the flexibility to acquire below-market properties, invest in improvements, and capture the resulting value creation. They are essential for any CRE investor navigating the gap between opportunity and stabilization.
H Equities
H Equities provides bridge loans from $5MM to $50MM across all major commercial asset classes nationwide, with a focus on speed and certainty of execution. Learn more
Frequently Asked Questions
How fast can a bridge loan close?
Bridge loans typically close in 2-4 weeks, significantly faster than conventional bank financing which can take 60-90 days. Some bridge lenders can close in as little as 7-10 days for straightforward deals.
What is the typical interest rate on a CRE bridge loan?
Bridge loan interest rates typically range from 8% to 13%, depending on the property type, leverage, borrower experience, and market conditions. Rates are higher than permanent financing due to the short-term nature and higher risk profile.
What is the difference between a bridge loan and a hard money loan?
While both are short-term and asset-based, bridge loans are typically used for commercial properties and offer more competitive rates (8-13%), while hard money loans are often used for residential fix-and-flip projects at higher rates (10-15%+). Bridge lenders tend to be more institutional and relationship-driven.
What types of properties qualify for bridge loans?
Most commercial property types qualify, including multifamily, office, retail, industrial, mixed-use, and hospitality. The property typically needs a clear path to stabilization — whether through renovation, lease-up, or operational improvements.
Related Terms
Hard Money Loan
An asset-based, short-term loan from a private lender, with faster closing and looser qualification requirements but higher interest rates than conventional financing.
Permanent Financing in CRE
Long-term financing (5-30 years) for stabilized commercial properties, replacing bridge or construction loans with lower rates and amortizing payment structures.
Interest-Only Loan
A loan where the borrower pays only interest during the loan term (no principal reduction), resulting in lower monthly payments but a full principal balance due at maturity.
Common CRE Bridge Loan Terms
The duration and structural features of a bridge loan, including term length, extension options, interest rate structure, prepayment provisions, and reserve requirements.
Senior Debt in Commercial Real Estate
The first mortgage or primary loan on a property, holding the highest priority claim on cash flow and sale proceeds in the capital stack.