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Simply defined, a commercial bridge loan is a temporary financing arrangement prior to getting a long-term financing scheme sanctioned. The loan is obtained and used for acquiring commercial property or real estate without delay or in cases where real estate is saved from foreclosure. They tend to be much more expensive that the conventional loans from formal lending organizations since the risk involved for the lender is greater. This type of loan is also called swing or interim loan and is taken by an individual or a company with a purpose of fulfilling a financial obligation before a more viable source can be found. Generally the lender of a commercial bridge loan insists upon a clearly defined exit strategy. This is the method that could be resorted to in case the borrower is unable to repay. Without exit strategy the prospective borrower is disqualified immediately.

When compared to other forms of loans, a swing loan can be had by paying 3% – 4% more as interest rate but does not carry prepayment penalty. The criteria for making someone eligible for a commercial bridge loan include:

• Having a clearly stated exit strategy.

• Profitability of a new venture has to be convincing enough for the lender.

• If the loan is for a business already established, all proofs of its running gainfully have to be provided to the lender.

• The loan-to-value ratio has to be 30% – 50%.

• When secured by the assets of a business, the loans’ repayment period is about 5 years.

• A suitable debt service ratio is needed.


The common types of commercial bridge loans are:

• Commercial Construction Bridge Loans

• Fractured Condo Scenario

• America’s Recovery Capital Loans

• Commercial Property Bridge Loans/Mortgage Bridge Loan

A commercial bridge loan is usually repaid by getting a permanent source of financing later on. Only businesses or people who are thriving well can afford a bridge loan to further their profits. The creditworthiness of the borrower is of no consequence. Interim loans refer to the way the loan is used rather than the source of the funds. Property developers often opt for such loans while waiting for the final approval of permit for the concerned building.

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