A commercial bridge loan is short-term financing, usually 12 to 36 months, that lets you buy, renovate or stabilize a property before it qualifies for long-term debt. Bridge lenders care most about the property’s value and your exit plan, so they close faster and accept deals banks won’t touch. In 2026, typical rates run from roughly 8% to 12%, interest-only, with 1 to 3 points.
Key takeaways
- Use a bridge loan when speed matters or the property is not yet stable enough for permanent financing.
- Typical terms: 12 to 36 months, interest-only, 65% to 75% of as-is value, and up to 80% to 90% of total cost on some value-add deals with a rehab holdback.
- Private bridge lenders can close in 1 to 3 weeks; debt funds often take 2 to 4.
- Every bridge loan needs a written exit: refinance, sale, or a planned extension.
What Is a Commercial Bridge Loan?
A bridge loan “bridges” a gap in time or in property condition. The gap might be a 14-day closing deadline, a building that is 60% leased, a motel that needs a renovation before a bank will lend, or a seller who needs to close before your SBA or agency loan is ready. Once the gap closes, you replace the bridge with a permanent loan or sell.
When Bridge Financing Makes Sense
- Time-sensitive acquisitions, auctions and discounted note or REO purchases.
- Value-add and repositioning: renovations, re-tenanting, raising rents.
- Lease-up after construction or major vacancy.
- Maturing loans when a bank won’t extend and the property isn’t ready for a new permanent loan.
- 1031 exchanges on a deadline. See bridge loans for 1031 exchanges.
- Partner buyouts and recapitalizations.
Typical Bridge Loan Terms in 2026
| Term | Typical range |
|---|---|
| Loan size | $250,000 to $50 million+ |
| Term | 12 to 36 months, often with 6 to 12 month extensions |
| Rate | About 8% to 12%, fixed or floating over SOFR |
| Points | 1 to 3 at origination; 0.25% to 1% per extension |
| Leverage | 65% to 75% of as-is value; up to 80% to 90% of cost on some value-add deals |
| Payments | Interest-only, sometimes with an interest reserve |
| Recourse | Recourse or non-recourse depending on lender and size |
| Closing time | About 7 to 30 days |
Use our interest-only calculator to estimate monthly carry, and the commercial loan calculator to test your takeout loan.
Who Makes Bridge Loans
- Private lenders and hard money funds: fastest, most flexible, highest cost. Compare them in hard money vs. bridge loans.
- Debt funds: larger loans, floating rates, often non-recourse.
- Banks: some offer bridge loans to existing clients, with slower approvals and full documentation.
What Bridge Lenders Look At
- As-is and as-stabilized value from a commercial appraisal or broker opinion.
- Business plan: renovation budget, lease-up schedule and timeline.
- Exit: the takeout loan amount at stabilized NOI, or sale comps. See bridge loan exit strategies.
- Sponsor: experience, liquidity and net worth.
- Credit: matters less than with banks, but recent bankruptcies or foreclosures need explaining.
How Fast Bridge Loans Close
A clean bridge file with a cooperative seller can close in 7 to 14 days. Most take 2 to 4 weeks, with the appraisal, title and entity documents driving the timeline. Our guide to bridge loan closing timelines breaks down each step.
The True Cost of a Bridge Loan
Look past the rate. Add origination points, the exit fee if any, extension fees, legal and appraisal costs, and the interest you will pay for the full hold. A 10% loan held 18 months with 2 points in and 1 point out costs about 18% of the loan amount in total. That is fine if the value you create is larger.
Bridge Loans by Property Type
- Hotel and motel renovation bridge loans
- Mixed-use bridge loans
- Bridge-to-perm after construction
- Residential investor bridge and fix and flip loans
How Bridge Loans Are Structured
Initial funding and rehab holdbacks
On a value-add deal, the lender funds part of the purchase at closing and holds back the renovation budget. You complete work, request a draw, the lender inspects, and funds are released. Many lenders fund 100% of the rehab budget through draws while capping the purchase advance at 70% to 80%.
Interest reserves
Some loans include an interest reserve: a portion of the loan set aside to cover monthly interest during renovation or lease-up. It protects cash flow when the property earns little, but you pay interest on the reserve once it is used.
Fixed vs. floating rates
Private bridge lenders often quote a fixed rate. Debt funds and banks usually float over 30-day SOFR plus a spread, and larger floating loans may require you to buy an interest rate cap. Budget the cap cost and model your carry at the cap strike, not today’s rate.
Recourse vs. non-recourse
Smaller private bridge loans are usually full recourse with a personal guarantee. Larger debt fund loans are often non-recourse with “bad boy” carve-outs, meaning you become personally liable for fraud, misapplied funds, unauthorized transfers or a voluntary bankruptcy.
The Metrics Bridge Lenders Use
| Metric | Formula | Typical limit |
|---|---|---|
| Loan-to-value (LTV) | Loan ÷ as-is value | 65% to 75% |
| Loan-to-cost (LTC) | Loan ÷ (purchase + renovation) | 75% to 90% |
| Loan-to-ARV / stabilized value | Loan ÷ value after renovation | 60% to 70% |
| Debt yield | NOI ÷ loan amount | Often 7% to 9%+ at stabilization |
| Exit DSCR | Stabilized NOI ÷ takeout debt service | 1.20 to 1.30 on the takeout loan |
The lender sizes the loan to the most restrictive of these tests.
Worked Example: Value-Add Apartment Bridge Loan
An investor buys a 24-unit apartment building for $2.4 million with a $480,000 renovation plan.
| Item | Amount |
|---|---|
| Purchase advance (75% of price) | $1,800,000 |
| Rehab holdback (100% of budget) | $480,000 |
| Total loan | $2,280,000 (79% of total cost) |
| Rate and fees | 10% interest-only, 2 points |
| Interest carry at full draw | About $19,000 / month |
| In-place NOI | $150,000 (6.6% debt yield) |
| Stabilized NOI after renovation | $250,000 |
| Stabilized value at a 6.5% cap rate | About $3.85 million |
Exit test: a permanent lender at 70% LTV would lend about $2.69 million. At 6.75%, 30-year amortization and a 1.25 DSCR, NOI supports about $2.57 million. The smaller figure, $2.57 million, pays off the $2.28 million bridge with room for closing costs. If stabilized NOI came in at $210,000 instead, the takeout would shrink to about $2.16 million and the investor would need new equity. That is why lenders stress-test the exit. Try your own numbers in our commercial loan calculator.
Full Fee Checklist
- Origination points (1% to 3%)
- Exit fee (0% to 1%, not all lenders)
- Extension fees (0.25% to 1% per extension)
- Underwriting, processing and legal fees
- Appraisal, environmental and property condition reports
- Draw inspection fees on rehab holdbacks
- Rate cap cost on floating loans
- Title, survey and recording costs
Bridge Loan Document Checklist
- Purchase contract or payoff statement
- Business plan: renovation scope, budget, timeline and exit
- Rent roll and trailing 12-month operating statement (income property)
- Contractor bids and the general contractor’s license and insurance
- Entity documents and a sponsor resume or real estate schedule
- Personal financial statement and proof of liquidity
- Insurance quotes, including builder’s risk if applicable
Bridge Loan Risks and How to Manage Them
| Risk | How to manage it |
|---|---|
| Renovation runs over budget | Carry a 10% to 15% contingency; get fixed-price contractor bids |
| Lease-up takes longer | Choose a term with extensions; fund an interest reserve |
| Rates rise before the refinance | Underwrite the takeout at a higher rate; buy a rate cap on floating debt |
| Values fall | Keep leverage moderate; plan a sale and a refinance exit |
| Draws are slow | Understand the draw process and inspection timeline before closing |
Bridge Loans vs. Other Options
| Option | When it beats a bridge loan |
|---|---|
| Permanent loan | The property is already stabilized. See bridge vs. permanent financing |
| Construction loan | Ground-up builds. See how to finance a construction project |
| DSCR loan | Rented 1 to 4 unit properties. See the DSCR loan guide |
| Hard money | Very fast or distressed deals. See hard money vs. bridge |
| Preferred equity or mezzanine | You need more leverage than a senior lender will give |
Frequently Asked Questions
How long is a commercial bridge loan?
Most commercial bridge loans run 12 to 36 months, often with one or two extension options of 6 to 12 months each.
What are commercial bridge loan rates in 2026?
Typical quotes run from about 8% to 12%, depending on leverage, property type, sponsor experience and whether the rate is fixed or floating. Expect 1 to 3 origination points.
How much can I borrow with a bridge loan?
Usually 65% to 75% of as-is value. Some value-add lenders fund up to 80% to 90% of total project cost, with renovation funds held back and released in draws.
Do bridge loans require tax returns?
Many private bridge lenders do not require personal tax returns. They focus on the property, the business plan and the exit. Larger or bank bridge loans may ask for full financials.
What happens if I can’t repay a bridge loan at maturity?
Options include paying an extension fee, refinancing with another bridge lender, selling the property, or negotiating a modification. Plan the exit before you close.
What is a rehab holdback on a bridge loan?
It is the renovation budget the lender holds back at closing and releases in draws as work is completed and inspected. Many value-add bridge lenders fund up to 100% of the rehab budget this way.
What is debt yield and why do bridge lenders use it?
Debt yield is NOI divided by the loan amount. It shows the lender’s return if it had to take the property back, regardless of interest rate or amortization. Many lenders want 7% to 9% or more at stabilization.
Are commercial bridge loans recourse?
Smaller private bridge loans are usually full recourse. Larger debt fund loans are often non-recourse with carve-outs for fraud, misapplied funds and voluntary bankruptcy.
What credit score do I need for a bridge loan?
Many private bridge lenders work with scores in the 600s because the property and exit matter most. Better credit and experience improve leverage and pricing.
Have a deal in mind? Working on a time-sensitive or value-add deal? Tell us about the deal and we will match it with the lenders that fit.