You found the perfect commercial property. The numbers work. The location is ideal. There is just one problem: the seller wants to close in 30 days, and traditional lenders are quoting 60 to 90 days minimum.
This is exactly where a commercial bridge loan becomes your most valuable financing tool. These short-term loans are designed to move fast, providing the capital you need when timing is everything.
Whether you are acquiring a value-add property, navigating a tight closing deadline, or bridging the gap until permanent financing comes through, understanding how commercial bridge loans work can mean the difference between closing your deal and watching it slip away.
Commercial Bridge Loan at a Glance
$1M-$50M+
Typical Loan Amount
9%-14%
Interest Rates
6-36 months
Loan Term
2-4 weeks
Time to Close
What Is a Commercial Bridge Loan?
A commercial bridge loan is short-term financing designed to bridge the gap between an immediate capital need and a longer-term financing solution. These loans typically range from 6 to 36 months and are used when traditional commercial mortgages are not available or cannot close fast enough.
Unlike conventional commercial loans that require fully stabilized properties and lengthy underwriting processes, bridge loans prioritize speed and flexibility. Lenders focus more on the property potential value and your exit strategy than on current cash flow metrics.
Commercial bridge loans are commonly used for:
- Acquisitions with tight timelines where traditional financing cannot close fast enough
- Value-add properties that need renovations before qualifying for permanent financing
- Lease-up situations where occupancy needs to stabilize
- Refinancing maturing debt when the property is not yet ready for a conventional loan
- Property repositioning requiring time to execute a business plan
The key characteristic of any bridge loan is its temporary nature. You are not meant to hold this financing long-term. Instead, you use it strategically to capture an opportunity, execute your business plan, and then transition to permanent financing or sell the property.
How Does a Commercial Bridge Loan Work?
The mechanics of a commercial bridge loan differ significantly from traditional commercial mortgages. Understanding these differences helps you determine if bridge financing is right for your situation.
Loan Structure
Most commercial bridge loans feature interest-only payments during the loan term. This keeps your monthly carrying costs lower while you execute your business plan. The full principal balance comes due at maturity, which is why having a solid exit strategy is critical.
Loan amounts typically range from $1 million to $50 million or more, with loan-to-value ratios between 65% and 80%. Some lenders will base LTV on the as-stabilized value rather than current value, which can increase your borrowing capacity for value-add deals.
Speed of Execution
This is where bridge loans truly shine. While traditional commercial mortgages take 60 to 90 days to close, bridge loans routinely close in 2 to 4 weeks. Some lenders can move even faster for straightforward deals with experienced borrowers.
This speed comes from streamlined underwriting processes and a focus on different metrics than traditional lenders use. Bridge lenders care most about your exit strategy, the property potential, and your experience level.
Commercial Bridge Loan Requirements
| Requirement | Typical Range | Notes |
|---|---|---|
| Loan-to-Value (LTV) | 65%-80% | Based on current or as-stabilized value |
| Minimum Credit Score | 650+ | Higher scores get better rates |
| Property Types | Most CRE | Multifamily, office, retail, industrial |
| Experience | Preferred | First-time investors need stronger financials |
| Exit Strategy | Required | Must show clear path to permanent financing |
| Reserves | 3-12 months | Interest reserves often required |
Interest Rates and Fees
Bridge loans carry higher costs than permanent financing. Interest rates typically range from 9% to 14%, depending on the property type, borrower experience, loan-to-value ratio, and market conditions.
Beyond the interest rate, expect origination fees of 1% to 3% of the loan amount. Some lenders also charge exit fees, extension fees, or minimum interest requirements. Understanding the complete cost structure is essential when evaluating bridge loan offers.
Ready to explore bridge financing for your commercial property? Contact our team to discuss your specific situation and get a preliminary quote within 24 hours.
What Are the Requirements for a Commercial Bridge Loan?
Bridge loan requirements are generally more flexible than traditional commercial mortgages, but lenders still have specific criteria they evaluate.
Bridge Loan vs Traditional Commercial Loan
Commercial Bridge Loan
- Closes in 2-4 weeks vs 60-90 days
- Flexible underwriting criteria
- Fund value-add and transitional properties
- Interest-only payments available
- Higher interest rates 9-14%
- Shorter terms 6-36 months
- Origination fees of 1-3%
- Requires clear exit strategy
Traditional Commercial Loan
- Lower interest rates 6-8%
- Longer terms 5-25 years
- Lower fees overall
- Predictable payments
- 60-90 day closing timeline
- Strict underwriting requirements
- Property must be stabilized
- Less flexibility for unique situations
Credit Score and Financial Strength
While bridge lenders are more flexible than banks, most still require a minimum credit score of 650 or higher. Borrowers with scores above 700 typically qualify for better rates and terms.
Beyond credit scores, lenders want to see financial strength. This includes adequate liquidity to cover reserves, a track record of successful real estate investments, and sufficient net worth relative to the loan amount.
Property Considerations
Bridge lenders finance most commercial property types, including multifamily, office, retail, industrial, mixed-use, and self-storage. However, underwriting criteria vary by property type and condition.
The property does not need to be stabilized, which is a major advantage over traditional financing. Lenders will evaluate the current condition, your improvement plans, and the realistic after-renovation value or stabilized value.
Exit Strategy
Perhaps the most critical requirement is demonstrating a clear, realistic exit strategy. Bridge lenders want to know exactly how you plan to pay off the loan at maturity.
Common exit strategies include refinancing to permanent financing once the property stabilizes or selling the property after executing your value-add plan. Lenders will scrutinize your exit strategy carefully, so be prepared to show detailed projections and market analysis supporting your plan.
Use our commercial bridge loan calculator to estimate your monthly payments and total loan costs based on your specific scenario.
When Should You Use a Commercial Bridge Loan?
Bridge financing is not the right choice for every situation. Understanding when these loans make sense helps you use them strategically.
When to Use a Commercial Bridge Loan
| Scenario | Why Bridge Works | Example |
|---|---|---|
| Acquisition with tight deadline | Fast closing beats competition | Auction purchase with 30-day close requirement |
| Value-add opportunity | Fund purchase plus renovations | Apartment complex needing unit upgrades |
| Lease-up period | Bridge gap until stabilized | New construction reaching occupancy targets |
| Refinance existing debt | Avoid maturity default | Maturing loan with property not yet ready |
| Property repositioning | Time to execute business plan | Converting office to multifamily use |
Ideal Scenarios for Bridge Financing
Bridge loans work best when speed, flexibility, or property condition prevents traditional financing. The most common scenarios include:
Competitive Acquisitions: In hot markets, sellers often choose buyers who can close quickly. A bridge loan lets you compete with cash buyers while still using leverage.
Value-Add Opportunities: Properties needing significant renovations rarely qualify for conventional financing. Bridge loans fund both the acquisition and improvements, with the permanent loan coming after stabilization.
Lease-Up Periods: Newly constructed or recently renovated properties may need time to reach stabilized occupancy. Bridge financing provides runway until cash flow supports permanent financing.
Maturing Debt: When existing debt matures but the property is not ready for refinancing, a bridge loan prevents default while you work toward stabilization.
Commercial Bridge Loan Process
Initial Application
Submit property details, purchase contract, and financial information
Preliminary Approval
Lender reviews deal and provides term sheet within 24-48 hours
Due Diligence
Appraisal, title search, environmental reports, and document collection
Underwriting
Full file review, property inspection, and final approval
Closing
Sign documents, fund the loan, and take ownership
When Bridge Loans May Not Be Appropriate
Bridge financing is not always the answer. Consider alternatives when:
- The property is already stabilized and qualifies for permanent financing
- You cannot clearly articulate a realistic exit strategy
- The higher costs will significantly impact your returns
- Market conditions make your exit strategy risky
The higher cost of bridge financing must be justified by the opportunity it enables. Run your numbers carefully to ensure the deal still works after accounting for bridge loan costs.
How Much Does a Commercial Bridge Loan Cost?
Understanding the complete cost structure of bridge financing helps you evaluate offers and budget accurately.
Bridge Loan Cost Breakdown
1%-3%
Origination Fee
0%-1%
Exit Fee
$5K-$15K
Legal Fees
$3K-$10K
Appraisal
Interest Costs
With rates ranging from 9% to 14%, interest represents the largest cost component. On a $5 million bridge loan at 11% interest, you would pay approximately $550,000 in annual interest, or about $45,833 per month.
Most bridge loans feature interest-only payments, so your monthly obligation equals just the interest portion. However, remember that the full principal comes due at maturity.
Origination and Processing Fees
Origination fees typically range from 1% to 3% of the loan amount. On that same $5 million loan, expect origination fees of $50,000 to $150,000.
Additional processing costs include appraisal fees ($3,000 to $10,000 depending on property complexity), legal fees ($5,000 to $15,000), title insurance, environmental reports, and other third-party costs. Budget $20,000 to $40,000 for these items on a mid-sized deal.
Pro Tip: Negotiate Your Terms
Bridge loan terms are often negotiable. Borrowers with strong experience, solid exit strategies, and lower LTV requests can often secure better rates and reduced fees. Always get multiple quotes and use them as leverage.
Potential Additional Costs
Read your loan documents carefully for these potential additional costs:
- Extension fees: If you need more time, expect to pay 0.25% to 1% for each extension period
- Prepayment penalties: Some loans require minimum interest payments even if you pay off early
- Exit fees: Certain lenders charge 0.5% to 1% at payoff
- Rate floors: Some floating-rate loans have minimum interest rates regardless of index movement
What Are Current Commercial Bridge Loan Rates?
Bridge loan rates vary significantly based on multiple factors. Understanding what drives pricing helps you secure the best terms.
Commercial Bridge Loan Rates by Property Type
| Property Type | Rate Range | Typical LTV | Notes |
|---|---|---|---|
| Multifamily | 9%-12% | Up to 80% | Most favorable terms available |
| Retail | 10%-13% | Up to 75% | Location and tenant quality matter |
| Office | 10%-14% | Up to 70% | Market conditions affecting rates |
| Industrial | 9%-12% | Up to 75% | Strong sector with good terms |
| Mixed-Use | 10%-13% | Up to 75% | Depends on residential component |
| Self-Storage | 9%-12% | Up to 75% | Attractive asset class for lenders |
Factors Affecting Your Rate
Several variables influence the rate you will receive:
Loan-to-Value Ratio: Lower LTV means lower risk for the lender, translating to better rates. Dropping from 75% to 65% LTV could save 0.5% to 1% on your rate.
Property Type: Multifamily properties typically get the best rates due to strong fundamentals and liquidity. Retail and office properties may carry premium pricing in the current market.
Borrower Experience: Lenders reward experience with better terms. First-time commercial investors may pay 1% to 2% more than seasoned professionals.
Exit Strategy Strength: A clear, well-documented exit strategy demonstrates lower risk and can improve your pricing.
Market Conditions: Overall interest rate environment and commercial real estate market conditions affect bridge loan pricing.
Watch Out: Hidden Costs
Some bridge lenders charge prepayment penalties, extension fees, or minimum interest requirements. Always read the fine print and ask about ALL potential fees before signing. A slightly higher rate with no prepayment penalty may cost less overall.
Getting the Best Rate
To secure competitive bridge loan pricing:
- Shop multiple lenders and use quotes as leverage
- Provide comprehensive documentation upfront
- Present a detailed, realistic business plan
- Consider higher down payment for rate improvement
- Highlight relevant experience and successful exits
Have questions about current bridge loan rates for your specific deal? Reach out to our team for a confidential discussion and customized quote.
How Do You Apply for a Commercial Bridge Loan?
The bridge loan application process moves quickly, but preparation is key to a smooth closing.
Commercial Bridge Loan Process
Initial Application
Submit property details, purchase contract, and financial information
Preliminary Approval
Lender reviews deal and provides term sheet within 24-48 hours
Due Diligence
Appraisal, title search, environmental reports, and document collection
Underwriting
Full file review, property inspection, and final approval
Closing
Sign documents, fund the loan, and take ownership
Step 1: Initial Application and Term Sheet
Start by submitting basic property information, your purchase contract (if applicable), and a brief business plan. Most bridge lenders can provide a preliminary term sheet within 24 to 48 hours.
The term sheet outlines proposed loan amount, interest rate, fees, term, and key conditions. This is not a commitment, but it gives you clarity on likely terms before investing in due diligence.
Step 2: Document Collection
Once you accept the term sheet, document collection begins. Be prepared to provide:
Documents Needed for Bridge Loan Application
Property Information
Purchase contract, rent roll, operating statements, photos, and business plan
Borrower Financials
Personal financial statement, tax returns, bank statements, and schedule of real estate owned
Entity Documents
Operating agreement, articles of organization, and good standing certificate
Third-Party Reports
Appraisal, environmental Phase I, property condition report, and survey
Having these documents organized and ready significantly speeds the process. Many delays come from borrowers struggling to compile required information.
Step 3: Due Diligence and Underwriting
The lender will order an appraisal, title search, environmental report, and potentially a property condition report. Simultaneously, underwriters review your complete file.
This phase typically takes 1 to 2 weeks. Stay responsive to requests for additional information to keep things moving.
Step 4: Final Approval and Closing
After underwriting approval, the lender issues a commitment letter with final terms. Legal documents are prepared, and closing is scheduled.
At closing, you will sign loan documents, fund any required reserves, and receive the loan proceeds. Total timeline from application to funding typically ranges from 2 to 4 weeks.
What Exit Strategies Work for Commercial Bridge Loans?
Your exit strategy is arguably the most important element of any bridge loan. Lenders scrutinize this carefully, and a weak exit plan can kill your deal.
Bridge Loan Exit Strategies
Permanent Financing Takeout
- Most common exit strategy
- Lower long-term rates
- Predictable refinance timeline
- Builds lender relationships
- Property must qualify for permanent loan
- Requires stabilization
- Market rate risk at refinance
- Prepayment penalties may apply
Property Sale
- Complete exit from investment
- Capture appreciation gains
- No long-term debt obligation
- Clean break for investors
- Market timing risk
- Transaction costs 6-10%
- Capital gains tax implications
- Must find qualified buyer
Refinance to Permanent Financing
The most common exit strategy is refinancing to a conventional commercial mortgage once the property stabilizes. This works well for value-add plays where you are improving occupancy, increasing rents, or upgrading the physical property.
To execute this exit successfully:
- Understand permanent loan requirements before taking bridge financing
- Build in adequate time for stabilization plus refinance process
- Monitor your progress against projections and adjust as needed
- Maintain relationships with permanent lenders throughout your hold period
Property Sale
Selling the property after executing your business plan is another viable exit. This approach works well when market conditions favor sellers or when you want a complete exit from the investment.
Consider these factors for a sale exit:
- Market timing and current cap rates
- Transaction costs (typically 6% to 10% of sale price)
- Tax implications of the sale
- Time required to find and close with a qualified buyer
Backup Exit Strategies
Smart borrowers also have backup plans. What if the market shifts? What if stabilization takes longer than expected? Having alternatives provides flexibility and demonstrates sophistication to lenders.
Common backup strategies include extending the bridge loan, bringing in additional equity, or pivoting between refinance and sale based on market conditions.
Clearhouse Lending Bridge Loan Programs
We offer commercial bridge loans from $1 million to $50 million plus with competitive rates, flexible terms, and closings in as fast as 2 weeks. Our experienced team understands complex deals and works with you to structure the right financing solution.
How Does Clearhouse Lending Approach Bridge Loans?
At Clearhouse Lending, we understand that commercial bridge loans are not one-size-fits-all. Every property and borrower situation is unique, and our approach reflects that reality.
Our Bridge Loan Program
We offer commercial bridge loans from $1 million to $50 million and above, with competitive rates, flexible structures, and closings in as fast as 2 weeks. Our team has decades of experience structuring complex transactions.
What sets us apart:
- Direct lending relationships for faster decisions
- Flexible underwriting that considers the full picture
- Experienced team that understands value-add and transitional deals
- Responsive communication throughout the process
- Creative structuring for unique situations
Learn more about our bridge loan programs and see if they fit your next opportunity.
Working With Our Team
When you contact us about a bridge loan, here is what to expect:
- An initial conversation to understand your deal and goals
- Preliminary feedback on feasibility and likely terms within 24 hours
- A term sheet if we can help, with clear explanation of all costs
- Dedicated point of contact throughout the process
- Proactive communication and problem-solving
We believe in transparency and building long-term relationships. Even if bridge financing is not right for your current deal, we will tell you and suggest alternatives that might work better.
Frequently Asked Questions About Commercial Bridge Loans
What is the minimum loan amount for a commercial bridge loan?
Most commercial bridge lenders have minimums of $1 million to $5 million. Some lenders serve the $500,000 to $1 million range, but options are more limited. At Clearhouse Lending, our minimum is $1 million.
Can I get a commercial bridge loan with bad credit?
Bridge lenders are more flexible than banks, but most still require credit scores of 650 or higher. Borrowers with lower scores may still qualify if they have substantial equity, strong experience, or other compensating factors.
How long does it take to close a commercial bridge loan?
Most bridge loans close in 2 to 4 weeks from application. Some deals close faster with experienced borrowers and straightforward properties. Complex situations may take slightly longer.
Are commercial bridge loan interest rates fixed or variable?
Bridge loans come in both fixed and floating rate structures. Floating rates are typically tied to SOFR or Prime plus a spread. Fixed rates provide payment certainty but may be slightly higher.
Can I use a bridge loan for construction?
Traditional bridge loans are not designed for ground-up construction. However, they can fund significant renovations. For new construction, look at construction loans specifically designed for that purpose.
What happens if I cannot pay off the bridge loan at maturity?
Most bridge loans offer extension options, typically for 6 to 12 months, with extension fees of 0.25% to 1%. However, relying on extensions is risky. Always have a solid exit strategy and backup plan.
Take the Next Step
A commercial bridge loan can be the key to capturing opportunities that traditional financing cannot support. Whether you are facing a tight closing deadline, acquiring a value-add property, or navigating a complex transitional situation, bridge financing provides the speed and flexibility you need.
The key to success is understanding when bridge loans make sense, preparing thoroughly for the application process, and having a clear, realistic exit strategy.
Ready to discuss your bridge loan needs? Contact Clearhouse Lending today for a confidential conversation about your deal. Our experienced team will provide honest feedback and, if bridge financing is right for you, a competitive quote within 24 hours.
Your next opportunity may depend on moving fast. Let us help you get there.