Executive takeaway: If your strategy depends on speed—snagging a mispriced asset, beating a competing offer, or starting rehab next week—bridge financing is often the right tool. Banks optimize for paperwork and historical income; bridge lenders optimize for asset value, business plan, and time-to-close.
The Investor’s Problem (and why timing kills deals)
You find the perfect fix-and-flip. The price is right, the scope is clear, and contractors are ready. However, a conventional bank typically requires 30–60 days for full underwriting, appraisal, and committee approval. By the time a term sheet shows up, the property is gone—or your seller has moved to a buyer who can close faster.
Conclusion: In competitive or time-sensitive situations, speed is not a luxury; it’s the edge.
What a Bridge Loan Really Is
A bridge loan is short-term, 6–24 months, interest-only financing that covers the gap between acquisition and your exit (sale or long-term refinance). It’s designed for transitional assets: properties that require rehabilitation, lease-up, seasoning, or entitlement before permanent debt becomes feasible.
Key features:
- Speed: closings in 5–15 business days (deal-ready files can be even faster).
- Focus on the asset: underwriting emphasizes collateral, ARV, business plan, and sponsor experience—not just W-2s and tax returns.
- Flexible structure: interest-only payments, draw schedules tied to milestones, and prepayment after a minimum interest period.
- Use cases: Fix & flip, bridge-to-perm/DSCR, value-add small multifamily, heavy-capex “rescue” buys, quick closes on auction or off-market deals.
Bridge vs. Bank: Side-by-Side (practical differences)
| Dimension | Bridge Loan (Private Lender) | Conventional Bank |
| Time to close | ~5–15 business days | ~30–60+ days |
| Underwriting focus | Asset value, ARV, business plan, sponsor track record | Personal income, tax returns, DTI, credit history |
| Common leverage | Up to ~70–80% of purchase (LTV) and ~80–90% of rehab (LTC) | Often lower leverage on distressed or non-stabilized assets |
| Payments | Interest-only (cash-flow friendly) | Amortizing (higher monthly outlay) |
| Documentation | Lean: entity docs, purchase contract, scope, budget, comps, insurance | Heavy: full income docs, tax returns, bank statements, reserves |
| Flexibility | High: rehab draws, extensions, tailored covenants | Low: rigid covenants, slower change approvals |
| Rate & fees | Higher nominal rate; 2–4 points common; minimum interest period | Lower nominal rate; fewer points; slower cycle |
| Best for | Speed, transitions, value-add | Stabilized, long-term holds |
Rule of thumb: Banks sell you price (rate). Bridge lenders sell you time and certainty. Use each for what it does best.
How Bridge Underwriting Works (what to prepare)
- Collateral & basis: purchase price, ARV (after-repair value), third-party valuation/BPO, and realistic comps.
- Business plan: scope of work, itemized budget, timeline, and contractor credentials.
- Exit path: sale comps or DSCR take-out assumptions at today’s rates; sensitivity if rates move ±100 bps.
- Sponsor: experience, liquidity for down payment + reserves; skin in the game matters.
Example Deal (hypothetical but realistic)
Strategy: Fix & Flip, light-to-medium rehab
- Purchase price: $280,000 (distressed, off-market)
- Rehab budget: $40,000 (cosmetics + systems tune-up)
- Bridge terms (illustrative): 12-month, interest-only; up to 85% LTC; 2 points
- Timeline: ~3 months door-to-door (45–60 days rehab + marketing and close)
- Sale price: $364,000 (+30% vs. purchase)
Estimated economics (simplified):
- Loan amount (≈85% LTC): $272,000
- Points (2%): $5,440
- Interest (≈11% annual, 3 months hold): ~$7,480
- Closing costs on sale (assume lean process/off-market, ~3%): ~$10,920
- Taxes/insurance/utilities (hold): ~$6,000
- Cash in (down payment + carry): ~$66,920
- Net profit: ~$14,160
- Return on invested cash (3 months): ~21%
The price lifted 30% from purchase; after rehab and soft costs, the investor still clears a strong cash-on-cash return—enabled by speed and certainty of close.
When a Bridge Loan Is the Wrong Tool
- Your plan depends on near-term appreciation to pencil.
- Heavy rehab requires permits/utilities with uncertain timelines.
- Exit depends on hitting a stretch rent that isn’t supported by comps.
- You’re truly long-term hold with stable cash flow today → go bank or DSCR from the start.
A Simple Playbook to Win With Bridge
- Have your file “deal-ready”: entity docs, POF, scope, budget, comps, GC credentials.
- Order valuation early (BPO/appraisal) and run your draw schedule by milestones, not calendar days.
- Negotiate speed for concessions: offer 7–12 day close for seller credits, temp buydowns, GC access pre-close.
- De-risk the exit: pre-underwrite your DSCR take-out or line up the listing agent and buyer list.
- Communicate daily: speed must be visible to the seller and all counterparties.
Positioning: Why Alto Capital
Traditional banks optimize for forms. Alto Capital optimizes for outcomes:
- Speed: decisions and closings in days, not weeks.
- Structure: Bridge, Fix & Flip, Ground-Up, DSCR—tailored to your plan, with draw management built for execution.
- Certainty: clear terms, predictable milestones, hands-on team that underwrites the deal, not just the file.
Need a bridge to your next win? See how a bridge loan can unlock your timeline.