Bridge Loans

A bridge loan is a short-term financing option used to cover an interim funding gap until you secure permanent long-term financing or sell an existing asset. [1, 2]

How It Works

• Duration: Usually lasts from a few weeks up to 1 to 3 years. [1, 2]

• Collateral: Secured against a valuable asset, most commonly real estate. [1, 2]

• Repayment (Exit Strategy): Paid off in a lump sum once your property sells or long-term funding comes through. [1, 2]

• Types:

  • Closed: Has a fixed repayment date tied to a definite event, like a house sale closing.

  • Open: Has no fixed repayment date, though lenders usually expect repayment within a year. [1]

Common Uses

• Buying a new home before your current house sells.

• Purchasing a property quickly at an auction.

• Funding home renovations or commercial property development.

• Covering temporary business cash flow needs while awaiting capital. [1, 2, 3, 4, 5]

Pros and Cons

• Pros: Fast approval speeds, flexibility in payments, and allows you to act quickly on time-sensitive deals.

• Cons: Higher interest rates and fees than traditional loans; failure to repay can result in losing the collateral asset