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What Is A Commercial Bridge Loan?

Updated: Apr 30

What Is A Commercial Bridge Loan?

If you are seeking funds for a real estate project there’s a good chance you came across the term commercial bridge loan. Bridge loans are unique in that they are short-term and function in a much different way than most business loans. In this article we will be answering the question: what is a commercial bridge loan and how does it work? In addition we will also help you determine if a bridge loan is right for your business needs. 

What Is A Commercial Bridge Loan?

A commercial bridge loan is a specific type of financing that is used to “bridge the gap” between a business’s current need and a more long term solution. In other words one would use this loan in real estate investing to immediately finance the purchase and renovation of a property  while you are in the process of securing long-term funding. 

One of the major differences in commercial bridge loans and permanent financing is in the way which the values are determined. Permanent financing loans are funded based on the loan-to-value (LTV) whereas commercial bridge loans are based on loan-to-cost (LTC) ratio or after-repair-value (ARV). Since these loans are based on the future long term value of the property they do carry more risk.

When To Use A Commercial Bridge Loan

Like we mentioned earlier you will want to use a commercial bridge loan when you have an opportunity that you want to take advantage of immediately. Commercial bridge loans will provide you with the funding you need to purchase and renovate a property in the short term while you secure the long-term financing you will eventually need. 

Here are a few scenarios where a commercial bridge loan could be used: 

  • A borrower needs to Buy & Renovate Investment Property

  • A borrower is unable to qualify for permanent financing. The bridge loan can be used to resolve credit issues that allow the borrower to eventually qualify for permanent financing.

  • A borrower has a limited time window for purchasing a property and needs to secure financing quickly. 

  • A borrower wishes to purchase and develop raw land, demolish existing structures and rebuild, or to purchase, renovate and sell existing properties.

Permanent financing often requires the project to be finished which makes commercial bridge loans ideal for real estate investors

What To Look For In A Commercial Bridge Loan

In addition to the many other factors you should consider when looking for a loan (interest rates, terms, loan amount, fees, lender reputation, etc.) there are 2 key characteristics you will want to pay attention to when considering a commercial bridge loan.

  1. Funding time: Since the entire purpose of a commercial bridge loan is to get access to funds quickly this is important to consider. Based on the timeframe, you may need to look outside traditional lenders. Banks are often too slow to fund businesses so looking for a private money lender like Alpha Tech Lending is the best answer.

  2. Prepayment incentives: You should want your commercial bridge loan to offer some prepayment incentive. Since this is a temporary loan you should want to pay it off early.

  3. If you take a bridge loan that is amortizing, paying it off early will save money by avoiding interest. 

  4. If you take on a commercial bridge loan with a factor rate—which means you’ll pay a set amount of interest no matter what—you should make sure it comes with a prepayment discount. 

It is important to make sure you don’t have to pay a prepayment penalty for paying off your loan early.


If you are a real estate investor looking to purchase a property that needs extensive renovations, commercial bridge loans can provide the needed funds. By taking advantage of our Commercial bridge loan program at Alpha Tech Lending you can find funding for many types of properties, including multifamily residential, retail, office, and industrial properties. 

To learn more about our commercial bridge loan program contact us today at 888-276-6565.


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