A bridge loan is short-term financing (typically 6-24 months) that 'bridges' a funding gap between two events — such as acquiring a property before selling another, or between construction completion and securing permanent financing.
Bridge loans address timing mismatches in capital structure. The most common use cases: (1) real estate acquisition — purchasing a new property before receiving proceeds from the sale of an existing one; (2) construction-to-permanent — funding a construction project with the expectation of refinancing to a permanent mortgage at completion; (3) business acquisition — interim financing while SBA 7(a) or conventional bank financing is being arranged; (4) commercial real estate value-add — buying and renovating a property before refinancing with stabilized-asset lending. Bridge loans are typically interest-only, have short terms (6-36 months), and carry higher rates than permanent financing (1-4 percentage points above conventional) to compensate the lender for short duration and refinance risk. Most bridge loans have a clear defined exit: documented refinance commitment, signed purchase contract, or lease-up targets. Bridge financing is offered by banks, credit unions, private lenders, and hard money lenders. Bank bridge loans use conventional underwriting (credit, income documentation, appraisal) and are cheaper; hard money bridge loans prioritize speed and asset-based approval at higher cost. The right choice depends on timing requirements and borrower creditworthiness.
A HELOC draws on existing home equity and is revolving — you can draw, repay, and draw again. A bridge loan is a short-term term loan with a specific defined exit event. HELOCs are typically cheaper and more flexible for ongoing needs; bridge loans are structured specifically for a transition between two defined financial states.
Most bridge loan agreements include extension options (typically 3-6 months at additional cost). If extension is not available and the exit is delayed, you risk default. Always negotiate an extension option when originating a bridge loan and maintain realistic timelines with buffer built in.
SBA 7(a) loans and SBA Express loans can sometimes be used for bridge-like purposes, but SBA loans are permanent financing instruments — they are not designed as short-term bridge facilities. For true short-term bridge needs, conventional or private bridge financing is more appropriate.