When Bridge Financing Makes Sense for Your Real Estate Deal

In real estate, time is money. The longer it takes to close a deal, the more likely it is that your competition will beat you to it. That’s when a bridge loan can help—by providing quick funds for acquisitions while you secure a permanent mortgage. 

Asset Based Lending has been bridge financing real estate deals since 2010. With over 9,000 projects worth over $3.8 billion funded, we understand how real estate deals work and what investors need to get them across the finish line. 

What Is a Bridge Loan?

A bridge loan is a short-term loan designed to “bridge” the gap between when you buy a property and when you secure permanent financing. At ABL, our bridge loans have terms of 12-24 months with no prepayment penalty, giving you the flexibility to enter and exit deals fast.

How Bridge Loans Work

When you get a bridge loan, the lender typically issues you a lump sum. This sum is then repaid with interest by the end of the loan term. 

At ABL, we offer bridge loans with interest-only payments during the loan term, with the principal balance due at maturity. This helps keep your financing costs low during what is often the most cost-intensive phase of a real estate project (think construction and marketing costs).

When to Get a Bridge Loan

Bridge loans are flexible financing vehicles that can be used for many purposes. Here are some situations when a bridge loan can be beneficial:

Time-Sensitive Acquisitions

Imagine you find an attractive investment property, but you’re worried someone else will buy it by the time you secure long-term financing. This is an ideal use case for a bridge loan. It can provide quick funding to close the acquisition, buying you time to shop for a long-term mortgage into which you can refinance the bridge loan.

Long-term rental loans are also available at Asset Based Lending, giving you the convenience and flexibility to refinance when you’re ready.

Leveraging Existing Equity

Let’s say you already own investment property and need to convert some of its equity into cash. A bridge loan lets you do just that. As long as you retain a minimum level of equity in the existing property, you can cash out the remaining equity to put toward further investments. 

This is a great way to scale your real estate portfolio when you’ve already maxed out your traditional financing options.

Fix & Flip Projects

Most home flippers want to be in and out of a deal within a year, making a bridge loan an ideal fit. Use it to buy a distressed property and finance rehab costs. Then use the proceeds from reselling the property to pay off the bridge loan and pocket the difference as profit. 

ABL has a dedicated fix-and-flip loan program that lets you borrow anywhere from $75,000 to $50 million at a loan-to-after-repair-value (LTARV) of up to 75%.

New Construction

For experienced investors and builders, a bridge loan can also help fund construction costs. After all, when you build a property from the ground up, you must reckon with not only the cost of the land but labor and materials. 

A new construction loan from ABL can provide short-term financing to cover acquisition and construction costs for up to two years. Meanwhile, you can make interest-only payments, keeping your costs low until you receive the proceeds from selling the completed property. 

When Not to Get a Bridge Loan

Of course, there are times when a bridge loan may not be the best fit:

No Clear Exit Strategy

Since bridge loans are short-term, you need a concrete plan for paying them off, such as a sale or refinance. Without a solid exit plan, you risk defaulting and hurting your credit profile. 

Unpredictable Cash Flow

For most bridge loans, you need reliable cash flow to make interest payments. If you don’t have savings or income lined up to make these payments, servicing the loan could become a strain.

You’re Over-Leveraged

If you already have significant debt across your portfolio, adding a bridge loan could be risky. A market downturn or unexpected project delay could cascade into larger financial trouble.

3 Tips for Getting a Bridge Loan

If you’re interested in a bridge loan, here are some best practices to follow:

Come Prepared

To expedite bridge loan approval, come prepared with a purchase price, estimated rehab costs, after-repair value (ARV), your exit strategy, and any necessary loan documents. That said, you can always talk to an ABL loan expert to find out exactly what you need. We’re happy to help.

Show Off Your Real Estate Track Record

While bridge lenders are generally more flexible than traditional lenders, experience matters. If you’ve pulled off successful real estate deals in the past, highlight them to lenders to increase your chance of loan approval. ABL has bridge loan programs for beginners and seasoned pros.

Work with a Reputable Lender

Not all lenders are created equal. To ensure a smooth borrowing experience, partner with a reputable lender that specializes in the type of bridge financing you need. Asset Based Lending has dedicated programs for bridge, fix & flip, and new construction loans.

Pre-Qualify for a Bridge Loan from ABL

Whether you’re racing to close a time-sensitive acquisition, funding a fix-and-flip, or financing a new construction project, ABL has the experience and capital to get your deal done. 

Pre-qualifying for a bridge loan from Asset Based Lending is fast, straightforward, and won’t affect your credit score. Simply take a few minutes to fill out the form, and then one of our loan experts will reach out to discuss the details and next steps.

When the right opportunity comes along, you’ll want a lender who can move as fast as you do. So why wait? Pre-qualify for a bridge loan from ABL today to keep your deal moving!