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.