- Bridge financing is temporary by design.
- The exit strategy is therefore critical.
- Refinancing is not guaranteed.
- Property values can change before the bridge matures. Interest rates can change.
- Loan extensions may be expensive.
- Exit delays can dramatically increase total cost.
- Fees can be overlooked when focusing on speed.
- Appraisal assumptions may prove optimistic.
- Construction delays can extend the loan.
- Permitting delays can destroy the timeline.
- A pending sale may fail. A buyer’s financing may collapse.
- The lender may require substantial reserves.
- Personal guarantees can increase exposure.
- Cross-collateralization can create additional risk.
- Prepayment provisions can matter.
- Default provisions need careful review.
- The cheapest bridge may not have the safest structure.
- The borrower can become trapped between two financing events.
- A delayed exit can turn a profitable project into an expensive one.
- “Guaranteed refinance” should be treated cautiously.
- The exit lender may apply different valuation standards.
- You need a backup plan before the bridge begins.
- A bridge loan should be evaluated primarily by the strength of the bridge’s exit.
Premium Checklist
Purpose
☐ I can explain precisely why bridge financing is necessary.
☐ I know what event will repay the loan.
☐ I have documented the expected repayment date.
Cost
☐ Principal verified.
☐ Interest rate verified.
☐ Points verified.
☐ Origination fees verified.
☐ Legal/document fees verified.
☐ Extension fees verified.
☐ Exit costs verified.
Timeline
☐ Best-case timeline calculated.
☐ Expected timeline calculated.
☐ Conservative timeline calculated.
☐ Delay scenario calculated.
☐ Monthly carrying cost calculated.
Exit
☐ Sale strategy documented.
☐ Refinance strategy documented.
☐ Backup exit documented.
☐ Exit valuation independently tested.
☐ Required refinancing conditions identified.
Stress Test
☐ Exit delayed 3 months.
☐ Exit delayed 6 months.
☐ Exit delayed 12 months.
☐ Property value falls 10%.
☐ Property value falls 20%.
☐ Refinancing becomes more expensive.
Final Question
“What happens if the event that is supposed to repay this loan doesn’t happen on schedule?”
If you don’t have a financially survivable answer, the bridge may be carrying you toward a cliff rather than across one.