Bridge Financing

What is a Bridge Loan? How Bridge Financing Works for Businesses

A bridge loan is short-term financing that fills a gap between an immediate capital need and a future liquidity event. It "bridges" the timing mismatch — giving you access to cash now, with repayment structured around a specific exit event.

The Core Concept

Every bridge loan answers one question: what is the exit?

Unlike a term loan — which is repaid through operating cash flow over time — a bridge loan is designed to be repaid through a specific, identifiable future event: a property sale, a completed equity raise, a pending bank approval, or a receivable collection. The bridge lender underwrites that exit event first, then the borrower.

This makes bridge financing uniquely suited to situations where the capital need is real and urgent, but the permanent solution is a few weeks or months away.

Common Uses for Bridge Loans

• Real estate transactions — bridge to a property sale or permanent mortgage while avoiding a condition on financing
• Business acquisitions — fund a purchase while the SBA, BDC, or bank loan is in process
• Equity bridge financing — fund operations between a Series A close and a signed term sheet
• Construction and development — bridge from construction completion to permanent takeout financing
• Seasonal working capital — fund peak-season inventory or payroll before a predictable revenue event
• Turnaround situations — maintain operations while a restructuring or asset sale is completed
• Contract mobilization — fund the start of a large contract before the first milestone payment

How Bridge Financing is Structured

Bridge loans are almost always:

• Short-term — 3 to 24 months in most cases
• Interest-only or bullet — most bridge loans require no principal repayment until maturity; some allow monthly interest payments with a balloon at term end
• Asset-secured — real estate, business assets, or expected proceeds are typically pledged as collateral
• Exit-underwritten — the lender's primary diligence is on the quality and certainty of the exit, not just the borrower's credit history

Bridge Loan Rates and Costs

Bridge financing is priced at a premium over conventional financing — because it is fast, flexible, and available when conventional lenders won't act. The key question is not whether bridge financing is expensive in absolute terms, but whether the cost is worth it relative to the opportunity or problem being solved.

A developer who needs $2M for 90 days to close on a property at a discount will pay far more by losing the deal than by paying 14% annualized on the bridge.

What is an Exit Strategy — and Why It Matters

Every bridge lender asks: how is this loan being repaid?

The clearer, more certain, and more verifiable your exit, the better the rate and terms you'll receive. Common exit types, ranked roughly by certainty:

1. Signed purchase and sale agreement — highest certainty; lender can see the closing date and proceeds
2. Committed bank or institutional term sheet — strong exit; lender can review the commitment letter
3. Signed equity subscription agreement — strong exit with visibility into timing and amount
4. Expected contract payment or receivable — moderate certainty; strength depends on counterparty credit
5. Expected refinance — moderate certainty; lender will assess whether the permanent financing is realistically achievable
6. Speculative exit — weakest underwriting position; highest rates or outright decline

Bridge vs. Conventional Financing: The Trade-Off

Factor	Bridge Financing	Bank / Conventional
Speed	5–10 business days	4–8 weeks
Rate	8–18% p.a.	Prime + 1–3%
Credit requirements	Flexible (exit-focused)	Strict (income + credit)
Term	3–24 months	1–25 years
Repayment	Bullet at exit event	Regular amortization

Ready to explore financing options?

Alliance arranges bridge financing from $100,000 to $25M+ with decisions in 48–72 hours.

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