4 min read
What Is a Bridge Loan and When Should You Use One?
A bridge loan is exactly what it sounds like — short-term financing that bridges the gap between right now and a longer-term funding event. The structure is simple: borrow today, repay when the take-out arrives. Speed is what keeps deals from falling apart while slower capital sources catch up.
How a bridge loan works
Bridge loans typically run 3 to 18 months. The lender funds a defined amount, secures the loan with the appropriate collateral (real estate, business assets, receivables), and is repaid in a single balloon payment when the borrower's exit event closes. Interest may be paid monthly or accrued and paid at exit.
What lenders underwrite on
A bridge loan is underwritten on the exit — the source of repayment — more than on FICO or recent business cash flow. The underwriter wants to see:
- A clearly documented take-out (SBA approval, refinance LOI, sale contract)
- Conservative loan-to-value if real estate or hard assets are involved
- Realistic timing — most bridges target a 6-month exit even if the term is longer
- A capable borrower who has executed on similar transactions before
When a bridge loan is the right tool
The clearest use cases are deals where speed beats price:
- Real estate closing in 14 days, conventional financing takes 45
- SBA acquisition loan is approved but won't fund for 60 days
- Equipment must be paid for before the customer pays the invoice
- Seasonal inventory build before peak revenue hits
When a bridge loan is the wrong tool
A bridge loan is not long-term working capital, and it's not a fix for chronic cash flow problems. If the take-out isn't real — or if it depends on something outside your control — a bridge can compound the problem instead of solving it. Be honest with your lender about the exit; a good underwriter will tell you when a different product fits better.
Getting funded
Northwood prequalifies bridge loans in 24–48 hours and funds in 2–5 business days. See current program parameters on our bridge loans page, or call (714) 679-8886 to walk through your specific deal.