Bridge loans are typically used to provide temporary financing over a short-term until permanent financing is secured or until a commercial debt obligation is removed. Bridge loans usually range between 1 to 12 months with varying repayment terms. Often repayment is made at the end of the term but can be daily, weekly or monthly payments. Bridge loans normally carry interest rates in the 8% to 20% range but may be much higher depending on the funding facility or the type of bridge loan. Bridge loans are most often used to provide working capital, debt repayment, purchasing or developing a commercial property, but can also be used for more specific reasons such as paying vendors, making payroll, paying off a tax lien, inventory purchase or clearing a purchase order. Bridge loans normally fund very quickly, which make them very appealing to businesses that are in need of fast financing while waiting on other, more traditional types of financing to become available. But with speed, comes increased risk for the lender which makes bridge loans more expensive than traditional types of term loans and lines of credit.
There are multiple types of bridge loans available to small or medium sized businesses. These loans range from working capital bridge loans to real estate bridge loans. Bridge financing is available from traditional banks, small, banks, community banks and credit unions. It is also available from non-traditional lenders that also offer mid-prime loans, asset-based loans, factoring, merchant cash advances and invoice financing.