Bridge loan is short-term commercial real estate financing, typically 12 to 24 months, used to acquire or reposition a transitional property before it qualifies for permanent debt. It carries higher, often floating interest-only rates and closes quickly. Borrowers use it to fund lease-up, renovation, or a fast purchase, then refinance into a permanent loan at exit.
How Does a Bridge Loan Work?
A bridge loan works by funding a property that does not yet qualify for permanent financing, then getting refinanced or paid off when the business plan is complete. The lender underwrites to the property's future stabilized value, not its current cash flow, so it accepts more risk and charges more. Payments are usually interest-only, preserving cash for the repositioning.
Per Stormfield Capital and PeerSense, commercial bridge loans commonly run 12 to 24 months, carry 1 to 3 origination points, and price at floating interest-only rates. Bridge rates in 2026 generally fall in a range of roughly 8% to 15%, driven by loan-to-value, sponsor experience, and property type. The loan is designed from the start to be refinanced into permanent debt at exit.
Term | Representative range (2026) |
Loan term | 12 to 24 months |
Interest rate | Roughly 8% to 15%, often floating |
Payment type | Interest-only |
Origination points | 1 to 3 points |
Loan-to-value | 65% to 75% of as-is value |
Time to close | 2 to 4 weeks |
Per Requity Group, most commercial bridge lenders in 2026 cap loan-to-value at 65% to 75% of as-is value, dropping to 60% to 65% for higher-risk assets or first-time borrowers. Higher leverage raises the lender's exposure, so a 75% loan-to-value loan almost always carries a rate premium over one at 65%. Speed is the other trade: bridge loans commonly close in 2 to 4 weeks against 60 to 90 days for conventional financing.
Why Bridge Loans Matter
Bridge loans matter because they let a sponsor act on a property that permanent lenders will not touch yet. A building with low occupancy, mid-renovation, or a fast closing deadline cannot support a conventional loan sized to in-place cash flow. Bridge financing funds the gap, and its cost is justified only if the repositioning lifts value enough to refinance out.
Per PeerSense and Stormfield Capital, the speed advantage is concrete: bridge loans close in 2 to 4 weeks versus 60 to 90 days for conventional debt, which can be the difference between winning and losing a competitive deal. That speed and flexibility come at a price. Floating rates in the roughly 8% to 15% range plus 1 to 3 points make bridge debt far more expensive than permanent financing.
The quotable point for an operator: a bridge loan is a tool for a plan, not a resting place, so the exit refinance must be underwritten before the loan is signed, not after.
Example
A sponsor buys a 60%-occupied office building for $8,000,000 and needs $1,500,000 to renovate and lease it up. A bridge lender offers 70% loan-to-value on the $8,000,000 as-is value, which is $5,600,000, at a 10% floating interest-only rate with 2 origination points over an 18-month term.
Item | Calculation | Result |
As-is value | Given | $8,000,000 |
Loan-to-value | Given | 70% |
Loan amount | 70% x $8,000,000 | $5,600,000 |
Origination points | 2% x $5,600,000 | $112,000 |
Annual interest-only cost | 10% x $5,600,000 | $560,000 |
Over the 18-month term, interest-only cost is $560,000 times 1.5, or $840,000, plus the $112,000 in points, for roughly $952,000 in financing cost. The sponsor stabilizes the building to 92% occupancy, raising its value to $11,000,000, then refinances into a permanent loan at 65% loan-to-value, or $7,150,000. That payoff clears the $5,600,000 bridge balance and returns capital, which is the only outcome that justifies the near-$1,000,000 cost of the bridge.
Variations and Edge Cases
Bridge loans are not uniform: pricing, leverage, and structure shift with the sponsor, the asset, and the business plan. The same building can draw very different terms depending on execution risk. The table below covers the variants an operator should confirm before signing a term sheet.
Variant | Treatment |
As-is vs loan-to-cost | Leverage may be quoted on as-is value or on total project cost, which changes proceeds |
Fixed vs floating | Most bridge rates float over an index; a cap or fixed rate reduces rate risk at a cost |
Recourse vs non-recourse | Recourse loans price lower but expose the sponsor personally |
Extension options | Many bridge loans include paid extensions if the business plan runs long |
Sponsor experience | Experienced sponsors can reach 75% to 80% loan-to-cost; first-timers are capped lower |
The most common mistake is signing a bridge loan without an underwritten exit. If the repositioning stalls or rates rise, the sponsor cannot refinance, the interest-only period ends, and the loan matures with no takeout in place. The exit plan should be stress-tested before the loan closes, not improvised at maturity.
Bridge Loan vs Permanent Loan
Bridge loan is often confused with a permanent loan, and both finance commercial property, but they serve opposite stages. A bridge loan is short-term, 12 to 24 month financing for a property in transition, priced high and sized to future value. A permanent loan is long-term, often 5 to 10 year financing for a stabilized property, priced low and sized to in-place cash flow.
The practical difference is what the lender underwrites. A bridge lender bets on the sponsor's business plan and accepts execution risk at a premium. A permanent lender requires the plan to already be complete, with stable occupancy and debt service coverage, and rewards that certainty with a lower rate and longer term.
Frequently Asked Questions
What is a bridge loan in commercial real estate?A bridge loan in commercial real estate is short-term financing, typically 12 to 24 months, used to acquire or reposition a transitional property before it qualifies for permanent debt. It carries higher, often floating interest-only rates, closes in weeks, and is refinanced into a permanent loan at exit.
What are typical bridge loan rates?Typical commercial bridge loan rates in 2026 fall in a range of roughly 8% to 15%, often floating, plus 1 to 3 origination points. The rate depends on loan-to-value, sponsor experience, and property type, with higher leverage carrying a premium over lower-leverage loans.
How fast can a bridge loan close?A commercial bridge loan commonly closes in 2 to 4 weeks, compared with 60 to 90 days for conventional financing. That speed is a primary reason sponsors use bridge debt to win competitive deals or meet a fast closing deadline.
What loan-to-value do bridge lenders offer?Most commercial bridge lenders in 2026 cap loan-to-value at 65% to 75% of as-is value. Higher-risk assets or first-time borrowers are often capped at 60% to 65%, while experienced sponsors with strong track records can reach 75% to 80% on a loan-to-cost basis.
Related Terms
Loan to Value Ratio
Debt Service Coverage Ratio
Net Operating Income
Debt Yield
Cap Rate