Bridge Loan
A bridge loan is short-term commercial financing — typically 1–3 years, interest-only, floating rate — used while a property is repositioned, leased up, or awaiting permanent financing. Bridge lenders underwrite the business plan and as-stabilized value rather than current income, accepting DSCRs as low as 1.10x or below.
Bridge debt costs more than permanent debt — typically several hundred basis points over comparable fixed-rate loans, plus origination and exit fees — because the lender bears transition risk.
Common uses: acquiring a half-empty building to lease up, funding renovations before a refinance, or closing quickly when permanent financing can't meet a deadline. The exit (sale or refinance) is the core of bridge underwriting.
Frequently asked questions
What is the difference between a bridge loan and a DSCR loan?
A DSCR loan is sized on the income a property already collects, so it needs stabilized occupancy to qualify. A bridge loan funds the period before that income exists — vacancy, renovation, or lease-up — and is sized on the as-stabilized projection instead. Relendi's benchmarks put bridge coverage at 1.10x and cap bridge LTV at 70%.
Will a bridge lender underwrite pro forma rents on a vacant building?
Usually yes, but the projection is the credit question rather than a formality. The lender tests the business plan behind it: signed leases or letters of intent, a priced renovation budget, a lease-up timeline, and an interest reserve large enough to carry the loan until the rents the projection assumes are actually collected.
What do bridge lenders require from the sponsor, not the property?
Track record with the same business plan and asset type, since a first lease-up is underwritten as a first lease-up. Then post-closing liquidity — the cash left after the equity contribution — sized to carry reserves and overruns. And usually recourse, a repayment or completion guarantee, because an untenanted building is weak collateral alone.
Why do residential DSCR lenders decline properties of five units or more?
Because five units or more is commercial collateral, not residential. It is appraised by capitalizing income rather than by comparable sales, underwritten on a full operating statement including vacancy, management and reserves, and usually closed in an entity — so it sits with portfolio banks, credit unions, debt funds and bridge lenders instead.
How much do bridge loan extension fees cost?
There's no standard rate — lenders set the fee loan by loan, typically a flat charge or a percentage of the outstanding balance, sometimes paired with a shorter term or reduced leverage. The stronger move is negotiating an extension option into the original loan documents, with an objective test — a stabilized DSCR or leasing threshold — the borrower must meet to exercise it, rather than negotiating fee and terms under maturity pressure.
What documents does a lender need to extend or roll a bridge loan?
Expect an updated package, not a rubber stamp: a current rent roll and trailing-12 operating statement, a budget-versus-actual capex report showing work completed, the leasing pipeline, proof of sponsor liquidity, and a written exit plan. The lender is re-underwriting at today's rates, so the file should show why the property now supports the takeout.