The primary goal of a bridge loan in commercial real estate is to provide quick, short-term financing to ‘bridge’ the gap until the end result is obtained. Bridge loans are shorter in term ranging typically from 6 months to 3 years and have higher interest rates to off set the risk that the lender takes. Bridge loans are paid back once the property is sold, refinanced, property improvements have been made or a specific change has occurred to allow for permanent financing or a sale.
Typical Bridge Loan Uses:
Advantages of a bridge loan include; quick closing, limited documentation, no prepayment penalty, asset based analysis along with many others. The bridge loan product is one that is based on the deal as a whole; evaluating the asset as well as the sponsor.