Definition: what a CRE bridge loan actually is
A commercial real estate bridge loan is a short-term, interest-only loan secured by a commercial property. The borrower uses the proceeds to acquire, renovate, or stabilize the asset, then refinances into permanent debt or sells the asset at the end of the business plan. Terms are typically 12-36 months with one or more extension options.
Bridge loans are sized to the current value of the asset (LTV) or to the all-in cost of the business plan (LTC), and they typically carry interest-only payments funded from an interest reserve. This structure preserves cash flow during a period when the asset isn't yet generating enough NOI to support amortizing debt.
When to use a bridge loan instead of permanent debt
Sponsors use bridge debt when the asset can't yet support permanent financing, either because in-place NOI is too low, the rent roll hasn't stabilized, the renovation isn't complete, or the closing timeline is too tight for bank or agency execution.
The most common use cases are value-add multifamily acquisitions, lease-up bridge for newly delivered assets, repositioning bridge for adaptive reuse, and cash-out bridge against appreciated equity. Bridge debt also funds time-sensitive acquisitions where speed is the binding constraint, distressed sales, off-market trades, and judicial foreclosures.
- Value-add acquisitions requiring renovation capital
- Lease-up bridge for newly delivered or repositioned assets
- Cash-out bridge against appreciated equity
- Distressed acquisitions and discounted note purchases
- Pre-development land and entitlement bridge
- Recapitalizations and partner buyouts
How CRE bridge loans are priced
Bridge debt is typically floating-rate, priced as a spread over SOFR. As of 2025-2026, all-in coupons generally range from SOFR + 250 to SOFR + 600 depending on asset class, leverage, sponsor track record, and business plan risk. Origination fees typically run 1-2 points, with exit fees of 0-1 point depending on lender.
Loan-to-value typically ranges from 60% to 75% on stabilized-basis underwriting, or 70% to 85% loan-to-cost on value-add plans. Interest reserves are sized to fund debt service through stabilization, and most lenders require a debt yield test (typically 8-10%) at exit.
What to look for in a bridge loan term sheet
Standard-looking bridge term sheets often hide material costs in the fine print. Minimum interest periods, prepayment lockouts, future-funding mechanics, and extension fee structures can materially change what the loan actually costs across the hold period.
Sponsors should focus on five things: (1) all-in coupon including reserves, (2) prepayment terms and minimum interest, (3) extension structure and fees, (4) future-funding mechanics for renovation draws, and (5) exit conditions including debt yield and DSCR tests. A loan that looks 50 bps cheaper on coupon can be 100 bps more expensive in total cost.
Frequently asked questions
- How long does a CRE bridge loan typically last?
- Commercial real estate bridge loans typically run 12 to 36 months, with one or more extension options. Most sponsors size the initial term to match their business plan and rely on extensions if execution slips.
- What's the difference between a bridge loan and a construction loan?
- A bridge loan finances an existing asset through a transition (renovation, lease-up, stabilization). A construction loan finances ground-up development, with draws funded against vertical construction progress. The underwriting, structure, and lender base differ materially.
- Are CRE bridge loans non-recourse?
- Most institutional bridge loans are non-recourse to the sponsor, subject to standard bad-boy carve-outs. Smaller bridge loans and some private-credit executions may require recourse depending on sponsor balance sheet and asset profile.
- How fast can a bridge loan close?
- Bridge loans can close in 30 to 60 days from term sheet, with experienced sponsors and clean diligence sometimes closing in three weeks. The binding constraint is usually third-party reports (appraisal, environmental, engineering), not lender turnaround.
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