A business bridge loan is short-term financing, typically 3 to 18 months, that covers a cash gap until a specific future event repays it: a customer payment, a property sale, an investment round, or a longer-term loan closing. It makes sense when that repayment event is documented and the cost of waiting is higher than the cost of borrowing.
The defining feature is the exit. A term loan is repaid from years of operating cash flow. A bridge loan is repaid from one identifiable payday, and lenders underwrite that payday as closely as they underwrite your business.
How does a business bridge loan work?
The structure follows the timeline of the event you're waiting on:
- You identify the gap. Money is coming, but not in time for a payment you need to make now.
- You document the exit. A signed contract, purchase order, sale agreement, term sheet, or loan commitment shows where repayment will come from and roughly when.
- The lender sizes the loan to the exit. The amount usually sits comfortably below the incoming payment, leaving room for delays and fees.
- You make small or no payments during the term. Many bridge loans are interest-only, with the principal due in one balloon payment when the event clears. Others use a custom schedule.
- The event pays off the loan. Sometimes the incoming funds go directly to the lender at closing.
Through Sagamore's lending partners, bridge loans run from $25K to $1M with terms of 3 to 18 months.
What counts as a real exit strategy?
This is where bridge loan applications succeed or fail. Lenders want evidence, not optimism.
| Exit event | Evidence lenders typically ask for | Main risk |
|---|---|---|
| Large customer payment | Signed contract or PO, proof of delivery, customer's payment history | Customer pays late or disputes the invoice |
| Sale of real estate or a business asset | Executed purchase agreement, closing timeline | Deal falls through or closing slips |
| Equity funding round | Signed term sheet or commitment letter | Round delays or terms change |
| Refinancing into a longer loan | Lender commitment or approval letter | Underwriting stalls, as SBA and bank loans can take weeks |
| Seasonal revenue | Prior years' bank statements showing the peak | Weak season |
An exit with a named counterparty, a signed document, and a date is strong. "Sales will pick up next quarter" is not an exit. If that's your situation, a revolving line of credit is usually the better fit.
When does a bridge loan make sense?
A bridge loan earns its cost when three things are true at once:
- The repayment event is concrete. You can point to a document and a date.
- Timing is the only problem. The money is real; it just arrives after you need it.
- Waiting costs more than borrowing. You'd lose a contract, a discount, a property, or momentum worth more than the loan's total cost.
Common hypothetical cases:
- A flooring distributor lands a $300,000 order from a regional builder on net-60 terms but must buy $110,000 of materials up front.
- A physical therapy group has signed a sale agreement on its old building but needs $250,000 now to start the build-out on its new one.
- A software company has a signed Series A term sheet with a closing expected in 90 days and needs $175,000 to cover payroll until then.
- A restaurant group has an SBA loan approved but not yet funded, and a landlord deadline that won't move.
What does a bridge loan cost?
Bridge loans generally cost more than term loans of similar size. You're paying for speed, short duration, and flexible structure. What matters is whether the total cost is smaller than what the loan protects.
Here's the flooring distributor example worked through with illustrative numbers. These are not quotes; actual pricing depends on the lender, the exit, and your profile.
- Loan: $110,000 for 6 months, interest-only
- Illustrative interest: 1.25% per month
- Illustrative origination fee: 2%
| Cost item | Calculation | Amount |
|---|---|---|
| Monthly interest | $110,000 × 1.25% | $1,375 |
| Interest over 6 months | $1,375 × 6 | $8,250 |
| Origination fee | $110,000 × 2% | $2,200 |
| Total cost of borrowing | $10,450 |
Now compare the other side. Say the $300,000 order carries a 20% gross margin, or $60,000 of gross profit. Borrowing costs about $10,450 to capture $60,000. Declining the order costs the full $60,000, plus the relationship with a builder who may send more work.
The math is less comfortable if the margin is thin. On a 5% margin, the same order produces $15,000 of gross profit, and the bridge would eat about two-thirds of it. Run your own version of this table before you apply.
What happens if the repayment event is delayed?
Delays are the main risk, so plan for them before you sign. In the example, a 3-month slip adds $4,125 of interest ($1,375 × 3) and possibly an extension fee.
- Ask what an extension costs and whether it's automatic or at the lender's discretion.
- Borrow against a date with slack in it, not the best-case date.
- Keep the loan amount well below the incoming payment so a partial delay or reduced payout still covers it.
- Tell the lender early if the event is slipping. Options narrow once a maturity date passes.
When is a bridge loan the wrong tool?
Using a bridge loan for the wrong kind of gap is the most common and most expensive mistake.
| Your situation | Better fit | Why |
|---|---|---|
| Gaps that recur every month or season | Line of credit | Revolving access; you don't reapply for each gap |
| Waiting on many B2B invoices, continuously | Factoring or AR financing | Funding grows automatically with your receivables |
| Buying equipment you'll use for years | Equipment financing | Repayment spread over the asset's useful life |
| One-time investment repaid from future profits | Term loan | Fixed payments over months or years |
| No identifiable repayment event | Rethink the plan | A bridge without an exit becomes a balloon payment you can't make |
A useful test: if you can't finish the sentence "This loan gets repaid on or around [date] when [named party] pays [amount]," it isn't a bridge loan situation.
How is a bridge loan different from a term loan or a line of credit?
| Bridge loan | Term loan | Line of credit | |
|---|---|---|---|
| Typical length | 3 to 18 months | 6 to 60 months | Ongoing, revolving |
| Repaid from | One specific event | Ongoing cash flow | Ongoing cash flow |
| Payment pattern | Often interest-only, then a balloon | Fixed installments | Varies with balance |
| Reusable | No | No | Yes |
| Underwriting focus | Strength of the exit | Business cash flow and credit | Business cash flow and credit |
| Sagamore partner range | $25K to $1M | $10K to $2M | $5K to $500K |
Commercial real estate investors also use "bridge loan" for short-term property financing before a permanent mortgage. That's a related but separate market with its own underwriting. If your bridge is tied to buying or refinancing a property, see commercial mortgages as well.
What do lenders need to see?
Sagamore's lending partners generally look for a credit score of 500 or higher, at least 4 months in business, and $5,000 or more in monthly deposits. For a bridge loan, the exit documentation carries as much weight as those minimums. Newer businesses with a well-documented exit can sometimes qualify where they wouldn't for a longer loan.
Have these ready:
- 3 to 6 months of business bank statements
- Government-issued ID and basic business information
- The document behind your exit: contract, PO, purchase agreement, term sheet, or loan commitment
- A short written timeline of when the money arrives and what could delay it
Bridge loans move quickly, and many close within days. The fastest applications are the ones that answer the exit question up front. When your documents are in hand, you can apply here, and we'll match the structure to your timeline.
