Bridge Loan vs Conventional Loan
A bridge loan is short-term financing, often interest-only and quick to close, used to bridge a gap until a property is sold, stabilized, or refinanced into permanent debt. A conventional loan is long-term, amortizing, lower-rate financing for a stabilized asset held over years. The bridge loan trades a higher rate for speed and flexibility; the conventional loan trades slower underwriting for lower long-term cost.
Short-Term Bridge vs Long-Term Financing
A bridge loan and a conventional loan solve different problems. A bridge loan is short-term financing, typically months to a few years, used to cover a gap: buying a property before selling another, repositioning or stabilizing an asset, or holding until permanent financing is in place. A conventional loan is long-term, amortizing debt for a stabilized property a borrower intends to hold. One is a temporary bridge to an exit; the other is the destination.
Term, Rate, and Structure
Bridge loans are short and usually interest-only, with a higher rate that reflects the added risk and speed, and a defined exit such as a sale or refinance. Conventional loans run for years, amortize principal over the term, and carry a lower rate because the asset is stabilized and the cash flow is proven. The bridge loan's cost is higher per month but paid over a short window; the conventional loan's cost is lower but carried for the long haul.
Speed and Underwriting
Bridge loans close quickly, often in weeks, because the lender underwrites the asset and the exit plan more than the borrower's long-term cash flow, sometimes lending against a property's future stabilized value rather than its current state. Conventional loans take longer, underwriting the stabilized property's income against measures like the debt service coverage ratio, loan-to-value, and debt yield. Speed is the bridge loan's advantage; cost and stability are the conventional loan's.
| Dimension | Bridge loan | Conventional loan |
|---|
| Term | Months to a few years | Many years, long-term |
| Payments | Often interest-only | Amortizing principal and interest |
| Rate | Higher | Lower |
| Speed to close | Weeks | Longer |
| Underwritten on | The asset and the exit plan | Stabilized cash flow |
| Purpose | Bridge a transition | Long-term hold |
Which One Fits
A bridge loan fits time-sensitive or transitional situations: acquiring quickly, repositioning a property, or covering the gap before a sale or permanent refinance, where speed and flexibility justify the higher rate. A conventional loan fits a stabilized asset held for the long term, where the lower rate and amortization matter more than speed. Many deals use both in sequence: a bridge loan funds the transition, then a conventional loan takes it out once the property is stabilized. Sizing either against LTV, debt yield, and DSCR shows what the asset supports.
How Zolvo Fits
For lenders running bridge and permanent loans side by side, Zolvo automates the servicing behind the book: applying and reconciling payments, tracking maturities and interest reserves, and monitoring portfolio performance, on top of the systems already in place. See bridge lending and commercial real estate lending.
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