What is a Bridge Loan?
A bridge loan is a short-term financing solution designed to "bridge" the gap between an immediate capital need and longer-term financing. In real estate, bridge loans typically have terms of 6-36 months and are used for acquisitions, renovations, or repositioning projects.
When to Use Bridge Financing
Bridge loans are ideal for situations requiring:
Speed
- Time-sensitive acquisitions
- Auction purchases
- Motivated seller opportunities
Flexibility
- Properties that don't qualify for traditional financing
- Value-add projects requiring renovation
- Lease-up situations
Transitional Needs
- Refinancing a maturing loan
- Stabilizing before permanent financing
- Partner buyouts
Bridge Loan Structure
Typical Terms
| Feature | Range | |---------|-------| | Loan Amount | $1M - $50M+ | | Term | 6 - 36 months | | LTV | Up to 80% | | Interest Rate | 8% - 12% | | Points | 1% - 3% |
Payment Structure
Most bridge loans are interest-only, which:
- Preserves cash flow during renovation/lease-up
- Allows capital to be reinvested in the project
- Reduces monthly carrying costs
The Bridge Loan Process
1. Initial Consultation
Discuss your project, timeline, and capital needs with your lender.
2. Application & Underwriting
Submit required documentation including:
- Purchase agreement or refinance details
- Property financials and rent roll
- Renovation budget and timeline
- Exit strategy
3. Term Sheet
Receive proposed terms, typically within 24-48 hours.
4. Due Diligence
Lender conducts appraisal, environmental review, and legal documentation.
5. Closing
Fund the loan and close your transaction.
Timeline: With an experienced lender, the entire process can take 7-14 days.
Exit Strategies
Every bridge loan needs a clear exit. Common strategies include:
- Refinance into permanent financing once stabilized
- Sale of the property after value creation
- Recapitalization with new equity
Costs to Consider
Beyond the interest rate, factor in:
- Origination fees (points)
- Legal and closing costs
- Appraisal and inspection fees
- Prepayment considerations
Choosing a Bridge Lender
Not all bridge lenders are equal. Look for:
- Track record of closing deals
- Speed and reliability in execution
- Flexibility in structuring
- Transparency in terms and fees
- Relationship approach for ongoing needs
The Excelsior Difference
At Excelsior Capital, our bridge lending program offers:
- Closings in as fast as 7 days
- Competitive rates and flexible structures
- Experienced professionals who understand real estate
- Relationship-based approach for repeat borrowers
Ready to discuss a bridge loan for your next project? Contact our team today.
