A commercial bridge loan funds the period between acquiring an asset and stabilising it. Permanent commercial lenders need documented, stabilised income — and a property that is vacant, under renovation, or mid-lease-up does not have it yet. Bridge financing buys the time to create it.
What commercial bridge financing does
It solves a timing problem. A permanent lender underwrites trailing income; a transitional asset has none yet, or not enough. Bridge financing underwrites the asset and the business plan instead, then steps aside once the permanent loan becomes available.
Bridge financing is priced to be temporary. The cost is deliberately high enough that holding it long-term destroys returns. That is a feature — it pushes borrowers toward the takeout, which is where the deal is supposed to end up.
When you need commercial bridge financing
- Acquisition before stabilisation. Buying a partially vacant building at a price that reflects the vacancy, then leasing it up.
- Lease-up. Carrying an asset while tenants are signed and income is established.
- Repositioning and adaptive reuse. Converting or repurposing a building, where the current use does not support permanent financing.
- Maturity defaults. An existing loan matures before a refinance is ready, and a forced sale is the alternative.
- Value-add renovation. Capital improvements that raise NOI, funded before the improved income exists.
- Speed-critical acquisitions. Auction purchases, portfolio breakups, or competitive contracts with short settlement windows.
Terms and structure
- Term. Typically 6 to 36 months, often with extension options at a fee.
- Interest-only. Most commercial bridge loans are interest-only, preserving cash flow during the transitional period.
- Leverage. Sized against current value, or in some cases against stabilised value with holdbacks released as milestones are met.
- Future funding. Renovation or leasing costs may be structured as holdbacks drawn against progress rather than funded upfront.
- Recourse. Frequently full recourse at this scale, though it varies by lender and deal size.
- Prepayment. Usually minimal, since early payoff is the intended outcome — but check for minimum interest or exit fees.
What commercial bridge financing costs
Model all of it, not the rate alone:
- Interest — above permanent commercial pricing, charged monthly on the drawn balance
- Origination points charged upfront
- Exit fee — some commercial bridge facilities charge one at payoff; ask specifically
- Extension fees if the business plan runs long
- Carrying costs — taxes, insurance, utilities across the entire hold, including vacant periods
- Third-party reports at both ends, because the takeout loan needs its own
Planning the takeout
The takeout is not a detail to arrange later. It is the underwriting question the bridge lender is actually asking.
- Permanent refinance. The standard exit. Confirm the property will clear the permanent lender's coverage requirement at stabilised income before you take the bridge, not after.
- Sale. A defined disposition on a realistic timeline for the asset class and market.
- Extension. A contingency with a cost, never the plan.
Run the takeout math first. A property can work perfectly on bridge financing and still fail the permanent loan's coverage test at stabilised income. Discovering that after the renovation is complete is the most expensive sequence in commercial investing.
Bridge vs permanent vs hard money
| Commercial bridge | Permanent | Hard money | |
|---|---|---|---|
| Asset stage | Transitional | Stabilised | Distressed or urgent |
| Term | 6–36 months | 5–10 years | Months |
| Underwrites | Asset plus business plan | Trailing stabilised income | Asset value |
| Speed | Fast | Slowest | Fastest |
| Cost | Above permanent | Lowest | Highest |
| Future funding | Common | No | Sometimes |
| Exit required | Yes | No | Yes |
Program parameters vary by lender and property type and change with market conditions. Figures here describe what is typical across the commercial and business-purpose market — they are not a quote. Send us the scenario for real numbers.
