04Speed first, structure after
Bridge to 504 — close now, take out on the debenture
A short-term first mortgage that lets you win a building on a seller timeline, then be refinanced by the permanent SBA structure once the CDC file catches up. It is a scheduling instrument, and it should always be underwritten against its own exit.
The capital stack
- Owner equity25%
- Bridge first mortgage75%
Terms
What this programme actually looks like
- Typical leverage
- 65% to 75%, sized against the take-out rather than the bridge
- Term
- 9 to 24 months, interest-only, with extension options priced up front
- Cost
- Origination points at closing, an exit fee in some structures, and a rate above permanent debt
- Timeline
- 10 to 21 days when title, appraisal and entity documents are ready
- Exit
- Named at underwriting: a 504 take-out, a conventional refinance, or a sale
Illustrative only. Bollard is a fictional business built as a website demonstration — the figures below are worked examples, not an offer, a quote or a rate sheet.
Fit
When it is right, and when it is not
A lender that only publishes the first list is selling. Both lists below are the same length in real life.
The right instrument when
- The seller will not wait ninety days and the building is worth moving for.
- A lease expiry or a landlord sale has put your operations on a clock.
- The building needs work before a permanent lender will look at it.
- A partner buy-out has a deadline the permanent market cannot meet.
The wrong instrument when
- There is no credible take-out. A bridge without an exit is a countdown, and we will say so rather than quote it.
- The business cannot carry interest-only at a bridge rate for the whole term plus a cushion.
- You are using it to avoid an underwriting problem rather than a timing problem — that problem arrives at maturity, larger.
Underwriting
What gets looked at, in what order
- 01
The exit is the credit
We underwrite the permanent loan first and the bridge second. If the take-out does not size, the bridge does not fund.
- 02
Carry, budgeted
Interest reserve, extension fees and the cost of a slipped closing all belong in the model at day one. The carry calculator exists for this.
- 03
Condition
A property that cannot be occupied is a construction file, not a bridge file, and it prices differently.
Worked example
Worked example — 18-day close on a vacated warehouse
- Purchase price
- $1,600,000
- Bridge loan at 70%
- $1,120,000
- Term
- 12 months, interest-only
- Origination
- 1.50 points
- Planned take-out
- SBA 504 at month 8
A worked example. Bridge pricing is deal-specific and moves with condition, exit and sponsor.
Questions
What people ask about this programme
Does taking a bridge hurt the 504 later?
No, provided the bridge was structured with the take-out in mind — the eligible costs, the entity structure and the equity documentation all need to survive the refinance.
What if the take-out slips?
That is what the extension option is for, and it should be priced at closing rather than negotiated under pressure at month eleven.
Next bay
Tell us about the building
A twenty-minute conversation is usually enough to know whether a deal works, which programme fits, and what your equity actually supports.
Or call the desk
(816) 555-0142Monday to Friday, 8am – 6pm Central
A demonstration number in the range reserved for fiction. It does not ring anywhere.