Commercial bridge loan: business-asset-secured (typically commercial real estate or business equity), 11-15% APR, 6-24 month term, closes in 1-3 weeks. Used to bridge a gap until permanent financing or a sale completes. HELOC: home-equity-secured, 8-12% APR, 10-year draw period, closes in 3-6 weeks. HELOC is cheaper on rate but exposes your home and the business-use interest may not be tax-deductible post-2017. Use bridge for clean business financing, HELOC for personal-use needs — not the other way around.
The bridge-vs-HELOC question comes up regularly because both are short-term financing options business owners with home equity can access. They are different products with different collateral, different tax treatment, and different risk profiles. This guide compares them on the dimensions that actually decide fit. For broader context see commercial bridge loans.
Structural Differences
| Dimension | Bridge Loan | HELOC |
|---|---|---|
| Collateral | Business asset (CRE, business) | Personal residence |
| APR | 11-15% | 8-12% |
| Term | 6-24 months | 10-year draw + 20-year repay |
| Structure | Lump sum, balloon at maturity | Revolving, draw as needed |
| Speed to close | 1-3 weeks | 3-6 weeks |
| Underwriting basis | Asset value + exit certainty | Personal credit + home equity |
| Risk to home | Personal guarantee but home not direct collateral | Direct lien on home |
| Tax deductibility | Business interest typically deductible | Limited post-TCJA for non-home use |
When a Bridge Loan Fits
- Buying a commercial property before selling another — classic bridge use case. Repay when the sale closes.
- Business acquisition with non-standard close timing — SBA financing approved but final docs taking longer than expected; bridge funds the close, SBA pays it off.
- Real estate value-add projects — bridge funds a property purchase + renovation, refinance to permanent commercial mortgage at stabilization.
- Time-critical deals where 3-6 week HELOC close kills the opportunity.
- Business owners without enough home equity for the deal size. A $750K project does not fit in most HELOCs but works as a bridge.
When a HELOC Fits
- Home improvement use — the original tax-deductible HELOC use case.
- Real estate investment using your home as the funding source for a smaller deal where speed is not critical.
- Standby liquidity — open the HELOC when you don't need it; draw later if a use comes up.
- Smaller dollar amounts — under $250K, HELOC pricing typically beats bridge.
- Established personal-credit borrowers with strong home equity and no time pressure.
Why HELOCs Often Lose for Business Use
HELOCs look attractive for business use because the rate is lower than a bridge, but three issues usually surface:
- Tax deductibility — the 2017 Tax Cuts and Jobs Act limited HELOC interest deductions to home-acquisition-or-improvement uses. Business-use HELOC interest is usually not deductible. The cost-of-capital math swings.
- Risk concentration — if the business defaults, you lose the home. Bridge loans use business collateral; the home stays separate from business risk.
- Underwriting limits — HELOCs are sized to home equity, not business need. A growing business may need more capital than the home equity supports.
Cost Comparison: $200K, 12-Month Hold
- HELOC: $200K drawn, 9% APR, 12 months. Interest cost: ~$18K. Risk: home lien.
- Bridge loan: $200K, 13% APR, 12 months, 1.5 points origination ($3K). Interest + origination: ~$26K + $3K = ~$29K. Risk: business asset only.
- Difference: ~$11K. The HELOC is cheaper but the risk profile differs.
Next Step
For business uses, the bridge loan is almost always the right structure. Compare commercial bridge loan options — one application to multiple bridge lenders.
The home-lien risk
The hidden cost of using a HELOC for business is what secures it: your house. A HELOC’s lower rate looks attractive, but it puts a lien on your personal residence to fund a business risk, so a deal that goes sideways can threaten your home rather than just a business asset. There are also throughput limits — HELOC sizes are capped by your home equity and draw periods, and lenders increasingly scrutinize business use. A bridge loan secured by the commercial property or business keeps the risk where it belongs and can fund larger amounts faster, which is why most owners pay the higher bridge rate rather than collateralize their home for a business purpose.
Frequently Asked Questions
Should I use a bridge loan or a HELOC for business?
A bridge loan is usually the better fit for a business purpose: it is secured by the commercial property or business rather than your home, funds faster, and can be larger. A HELOC’s lower rate comes at the cost of a lien on your residence.
Why is a HELOC risky for business use?
It secures a business risk with your personal home, so a deal that fails can threaten where you live. HELOC size is also capped by home equity, and lenders increasingly limit business use.
Is a bridge loan more expensive than a HELOC?
Usually yes on rate — bridge loans price for speed and short duration. But over a short hold the dollar difference can be modest, and the bridge keeps the risk off your home, which many owners consider worth the premium.
How long are bridge loans and HELOCs?
Bridge loans typically run 6–18 months and are designed to be repaid from a sale or refinance; a HELOC is a revolving line with a multi-year draw period, better suited to ongoing or smaller draws than a single short-term business need.
Frequently Asked Questions
What is the difference between a bridge loan and a HELOC?
A commercial bridge loan is a short-term loan secured by a business asset (typically commercial real estate or another business asset), used to bridge a gap until a permanent financing closes or a sale completes. A HELOC is a home equity line of credit secured by the borrower's personal residence, with a 10-year draw period and revolving structure. Different collateral, different products.
Which is cheaper?
HELOCs are usually cheaper on rate (8-12% vs 11-15% for bridge), but the comparison only matters if you have enough home equity AND the use of funds is a personal-or-investment use that does not run afoul of HELOC tax-deduction rules.
Can I use a HELOC for business?
Yes, technically — you can use HELOC proceeds for any purpose. But interest deductibility for business use went away under the 2017 Tax Cuts and Jobs Act for HELOCs not used to buy/improve the home. Talk to your CPA before assuming the interest is deductible.
How fast does each close?
Bridge loans close in 1-3 weeks. HELOCs close in 3-6 weeks (longer if appraisal queues are backed up). For genuinely time-critical deals, bridge wins.
What if I don't want to risk my home?
Commercial bridge loan. The collateral is the business asset; your home is not at stake. HELOC default = lien on your home.