Updated April 28, 2026
Quick answer
Term loan: permanent financing, 1-10 year amortization, 8-13% APR, monthly P&I from operations. Bridge loan: short-term financing, 6-24 month term, 10-15% APR + 2-3 points, repaid from refi or sale. They solve different problems — bridge is the on-ramp, term loan is the destination. Many real-estate and acquisition deals use both as a sequence: bridge funds the immediate close, then refinance to permanent term loan or SBA once the asset stabilizes. Use bridge only when you have a clear exit; use term loan when the financing is permanent.
The term-loan-vs-bridge decision is really two questions: do you need permanent financing or a temporary gap-fill, and if temporary, what's the exit? This guide compares the two products and shows how they often work together as a sequence rather than alternatives. For broader context see term loan vs line of credit and bridge loan vs HELOC.
How Each Works
Term loan
Permanent business loan. Lump-sum at close, fixed monthly P&I, 1-10 year amortization. Repaid from business operations over the term. Most common business financing structure.
Bridge loan
Short-term loan to bridge a gap until permanent financing closes or an asset sells. Lump-sum at close, interest-only or interest-and-some-principal monthly, 6-24 month term, balloon at maturity. Repaid by refinancing to permanent (term loan, SBA, conventional CRE) or selling the underlying asset.
Side-by-Side
| Dimension | Term Loan | Bridge Loan |
|---|---|---|
| Term | 1-10 years | 6-24 months |
| APR | 8-13% | 10-15% |
| Origination / Points | 0.5-1.5% | 2-3% |
| Repayment | Monthly P&I | Interest-only or partial P&I, balloon at maturity |
| Exit | Scheduled amortization | Refi or asset sale required |
| Speed | 3-6 weeks | 1-3 weeks |
| Best for | Permanent financing | Gap until permanent or sale |
When a Term Loan Fits
- Permanent financing for a defined investment — equipment, expansion, acquisition
- Predictable monthly cash flow from operations to support fixed P&I
- 5-10 year hold horizon on the asset or investment
- Strong credit and operating history matching term loan underwriting boxes
When a Bridge Loan Fits
- Acquisition closing on tight timeline — SBA in flight but won't close in time
- Value-add hold — buying a property, renovating, refinancing to permanent at stabilization
- Property sale dependent — need to buy before selling another
- Construction completion — permanent financing tied to certificate of occupancy
- Borderline credit — permanent product not yet available; bridge fills until borrower stabilizes
The Bridge → Term Loan Sequence
Many real-estate and acquisition deals use both products as a sequence:
- Day 1: Bridge loan funds immediate close (acquisition, value-add, or property sale gap)
- Months 1-12: Asset stabilizes, AR seasons, value-add work completes, or cash flow demonstrates
- Months 12-18: Permanent term loan or SBA refinance closes; bridge pays off at maturity
- Months 18-120: Permanent term loan amortizes from operations
The bridge premium (2-3% in extra rate plus higher origination) is the cost of speed and flexibility. Plan the refinance to permanent on day 1 of the bridge; don't leave the exit ambiguous.
Cost Example: $500K, Bridge → Term Sequence
- Bridge phase: $500K, 12-month bridge, 13% APR + 2.5 points. Year-1 cost: $65K interest + $12.5K origination = ~$77.5K. Asset stabilizes during year 1.
- Refi to term loan: $500K, 5-year term, 10% APR, 1% origination. Year 2-6 monthly P&I: ~$10,623. Total interest over 5 years: ~$137K + $5K origination = ~$142K.
- Total cost over 6 years: $77.5K bridge + $142K term loan = ~$219.5K vs $500K principal.
If permanent term loan had been available day 1 (no need for bridge), total 6-year cost would have been ~$170K (term loan rates × 6 years). The bridge premium cost ~$50K for the speed and certainty of the day-1 close.
Next Step
Define your timeline and exit, then run both quotes. Compare term loan and bridge offers — one application reaches both products.
Sources & Further Reading
- SBA 7(a) Loan Program — Official terms, eligibility and the $5 million program maximum for the SBA's primary business loan.
- Federal Reserve Senior Loan Officer Opinion Survey — Quarterly survey of bank lending standards, including commercial real estate and business loans.
Rate, fee, and policy figures cited above reflect current published guidance as of the article publication date. Always confirm current figures with the cited source or your lender before acting on financing decisions.
Frequently Asked Questions
What is the difference between a term loan and a bridge loan?
A term loan is longer-term, amortizing financing for an established need; a bridge loan is short-term, often interest-only money to cover a gap, repaid from a sale, refinance, or the term loan that follows it.
When should I use a term loan instead of a bridge loan?
When the need is ongoing and you want predictable amortizing payments at a lower rate — equipment, expansion, or working capital you will repay over years rather than a one-time short gap.
What is the bridge-to-term sequence?
Use a bridge loan to act fast now — close a deal or fill a gap — then refinance into a cheaper, longer term loan once the situation stabilizes. The bridge buys speed; the term loan provides the durable, lower-cost financing.
Which is cheaper, a term loan or a bridge loan?
A term loan, almost always, because it is longer-term and lower-risk for the lender. A bridge is priced for speed and short duration, so you pay a premium for the flexibility.
What's the difference?
A term loan is permanent financing — 1-10 year amortizing structure repaid from operations. A bridge loan is short-term financing (6-24 months) used to bridge a gap until permanent financing closes or an asset sells. Bridge is the on-ramp; term loan is the destination.
Which is cheaper?
Term loans are cheaper on rate (8-13% vs 10-15% for bridge) but bridge loans are short-term so total dollar cost depends on hold period. Bridge loans typically have higher fees (2-3 points origination vs 0.5-1.5 for term).
Can I refinance a bridge into a term loan?
Yes — this is the standard sequence. Bridge loan funds the immediate need (acquisition close, value-add hold, etc.); refinance to permanent term loan or SBA when the asset stabilizes or the original financing path matures.
When would I use a bridge instead of a term loan?
When the term loan you want isn't available yet — SBA still in underwriting, property not yet stabilized, AR not yet seasoned, deal closing on a tight timeline. Bridge fills the gap until the term loan can close.
Are bridge loans always real estate secured?
No — commercial bridge loans frequently secure with CRE but not always. Some bridge structures are unsecured or secured against business assets. Real-estate-backed bridge is most common; check the term sheet.