Bridge loans are often used for commercial real estate purchases to quickly close on a property, retrieve real estate from foreclosure, or take advantage of a short-term opportunity in order to secure long-term financing.
Bridge loans on a property are typically paid back when the property is sold, refinanced with a traditional lender (such as a bank), the property is improved or completed, or there is a specific improvement or change that allows a permanent or subsequent round of mortgage financing to occur.
Bridge loans are critical when a developer is facing a time crunch. The timing issue may arise from project phases with different cash needs and risk profiles as much as ability to secure funding. In short, a bridge loan "bridges the gap" between longer term loans.