Commercial Bridge Loans in Canada
Short-Term Financing for Time-Sensitive Commercial Deals
Cedar Commercial sources bridge lending solutions for commercial borrowers across Canada who need to move quickly, navigate a financing gap, or act on an opportunity that conventional timelines cannot accommodate. We work with a broad network of bridge lenders, from private capital sources to alternative institutional lenders, and structure terms around your property, your exit strategy, and your timeline. If you have a deal that needs to close before conventional financing is ready, we can help you get there.
Commercial Bridge Loans in Canada
Commercial real estate transactions rarely move in straight lines. Properties need to be acquired before existing assets are sold. Construction loans mature before stabilization is complete. Conventional financing takes time that a deal does not always have. Bridge lending exists to fill these gaps, providing short-term, asset-secured capital that allows borrowers to move decisively when timing is the determining factor.
Cedar Commercial works with investors, developers, and business owners across Canada who need bridge financing to keep transactions on track. Bridge lending is not a last resort. For experienced borrowers navigating complex deals, it is a deliberate capital tool that solves specific timing and structural challenges that conventional financing cannot address. This page explains how bridge lending works in Canada, who it is designed for, and what borrowers need to understand before pursuing it.
What Is Bridge Lending?
Bridge lending is a form of short-term commercial financing secured against real property. It is designed to bridge the gap between an immediate capital need and a longer-term financing solution. The defining characteristic is speed and flexibility: bridge loans are structured to close quickly and are assessed primarily on the value of the underlying asset rather than the borrower’s income documentation alone.
Common use cases for bridge lending in Canada include:
- Acquiring a property before the sale of an existing asset closes
- Funding a commercial property purchase that does not yet qualify for conventional financing
- Replacing a maturing construction or development loan before stabilization is complete
- Financing a value-add acquisition where the property needs repositioning before institutional lenders will engage
- Providing interim capital for borrowers in the middle of a refinance or portfolio restructure
Bridge lending fills a structural role in commercial real estate finance that banks and credit unions are not positioned to fill. The flexibility that makes it useful is also what distinguishes it from conventional term debt.
How Bridge Lending Works
The process for securing a bridge loan in Canada moves faster than conventional financing, but it still follows a structured assessment. The lender’s primary focus is the property’s current or near-term value and the borrower’s exit strategy.
The typical bridge lending process involves the following stages:
- Initial assessment: The lender reviews the property, the loan request, and the borrower’s stated exit strategy. This may be a sale, a refinance into conventional debt, or completion of construction.
- Valuation: An appraisal or broker opinion of value is typically required. Lenders want to confirm the loan amount is supportable by the asset.
- Term sheet: If the deal meets the lender’s criteria, a term sheet is issued outlining the loan amount, rate, term, fees, and conditions.
- Due diligence: Environmental reviews, title searches, and property condition assessments are completed as required by the lender.
- Funding: Once conditions are satisfied, the loan closes. Bridge loans can fund in days to weeks depending on deal complexity and lender type.
The exit strategy is central to every bridge lending decision. Lenders want a clear, credible path to repayment within the loan term. Borrowers should be prepared to articulate exactly how and when the bridge loan will be retired.
Who Qualifies for Bridge Lending
Bridge lending in Canada is available to a broad range of borrowers because approval is driven more by asset quality and exit viability than by income verification or credit score alone. That said, lenders do assess risk carefully.
Eligible property types typically include multi-unit residential, retail, industrial, office, mixed-use, and land with near-term development potential. Specialty assets are considered on a case-by-case basis depending on the lender.
Borrower profiles vary widely. Bridge lending serves experienced investors acquiring transitional assets, developers managing timing between construction and term financing, and business owners who need capital quickly to act on a purchase opportunity. Borrowers with non-standard income documentation or recent credit events may also find bridge lending more accessible than conventional channels, provided the asset and exit strategy are sound.
Underwriting for bridge loans focuses on the loan-to-value ratio of the subject property, the credibility of the exit strategy, the borrower’s relevant experience, and the overall complexity of the transaction. Lenders will assess how realistic the repayment timeline is and what risk exists if the exit takes longer than projected.
Key Loan Features
Bridge lending structures in Canada share common characteristics, though terms vary by lender and transaction type.
- Loan-to-value: Most bridge lenders in Canada will advance between 65 and 80 percent of the property’s current appraised value. Higher leverage is available in certain circumstances, depending on asset quality and deal structure.
- Term: Bridge loans are short-term by design. Terms typically range from 6 to 24 months, with some lenders offering extensions where the exit timeline requires it.
- Amortization: Most bridge loans are interest-only for the duration of the term, preserving cash flow during the transitional period.
- Interest rates: Bridge lending carries a higher cost of capital than conventional financing, reflecting the product’s speed, flexibility, and risk profile. Rates are typically in the range of 8 to 14 percent, depending on leverage, asset type, and lender category.
- Recourse: Recourse requirements vary. Many bridge lenders require a personal guarantee, particularly at higher leverage levels or for borrowers with limited track records.
Documentation: Lenders generally require a current appraisal, title documentation, a Phase I environmental report for certain asset types, a clear outline of the exit strategy, and borrower financial information.
Advantages and Risks
Bridge lending offers genuine advantages for borrowers in the right circumstances. Speed is the most significant. Institutional lenders may take 60 to 90 days to approve and fund a conventional commercial mortgage. Bridge lenders routinely close in two to four weeks, which can be the difference between securing a property and losing it.
Flexibility is the second major advantage. Bridge lenders can work with assets in transition, borrowers with complex profiles, and deal structures that do not fit conventional underwriting templates. This opens doors that would otherwise remain closed.
The risks are real and should be understood clearly. The cost of bridge capital is materially higher than conventional financing. Interest costs accumulate quickly on a short-term loan, and borrowers who underestimate the timeline to exit can find themselves paying more than projected. Extension fees, lender fees, and legal costs add to the total cost of the transaction.
Refinancing risk is the most consequential exposure. If market conditions change between the bridge loan closing and the intended exit, the borrower may find it more difficult or more expensive to retire the bridge debt than anticipated. Borrowers should build realistic timelines and carry adequate reserves before committing to a bridge structure.
How a Commercial Mortgage Broker Adds Value in Bridge Lending
Bridge lending is a fragmented market in Canada. Different lenders specialize in different asset classes, loan sizes, and risk profiles, and many of the most competitive sources of bridge capital do not work with borrowers directly. A commercial mortgage broker with active relationships across the bridge lending market gives borrowers access to options that are not available through a standard lender search.
Structuring is equally important. A well-structured bridge loan defines a clear exit path, negotiates terms that align with the borrower’s timeline, and avoids conditions or covenants that create complications down the line. An experienced broker reviews the deal before any lender conversation takes place, identifies potential underwriting issues, and positions the file to attract competitive terms.
For time-sensitive transactions, broker involvement also reduces execution risk. Managing lender communication, coordinating third-party reports, tracking conditions, and maintaining closing timelines requires consistent attention. A commercial mortgage broker handles this process on the borrower’s behalf, keeping deals on track without requiring the borrower to manage multiple parties simultaneously.
Connect With a Commercial Mortgage Broker
If you are evaluating bridge lending as part of a commercial real estate transaction in Canada, the first step is a clear assessment of whether the structure fits your objectives and what it will realistically cost. Cedar Commercial works with borrowers across Canada to source and structure bridge financing that is matched to the deal and the exit strategy. Contact us to arrange a consultation and get a straightforward picture of your options.
What does a commercial bridge loan actually cost in Canada — with a full example including fees?
The cost of a commercial bridge loan in Canada is substantially higher than conventional financing, and understanding the full cost — not just the interest rate — is essential before committing to bridge capital. The total cost of a bridge transaction includes the interest rate, lender fees, broker fees, legal costs on both sides, and third-party due diligence costs. These items together determine the true cost of the transaction, and borrowers who model only the interest rate consistently underestimate what bridge financing actually costs.
Three things stand out in this analysis. First, the one-time fees are significant relative to the interest cost — on a 12-month bridge they add approximately three to four percent to the effective cost. On a six-month bridge, the same fees over half the period make the effective cost even higher. Second, the cost per month of not closing a deal — or of a deal falling apart because financing was not in place — must be weighed against bridge costs. Third, on a short-term bridge where the exit is reliable and the opportunity is clear, the math often works decisively in favour of bridging rather than waiting.
The practical question is not whether bridge financing is expensive in absolute terms. It is whether the cost is justified by the opportunity being financed. A property acquisition that generates a gain well above the bridge cost is a rational use of bridge capital. A bridge loan used to defer a problem rather than solve it is an expensive way to compound a structural issue.
What does a strong exit strategy look like for a bridge loan — and what does a weak one look like?
The exit strategy is the central underwriting criterion for every bridge loan in Canada. Lenders can work with imperfect assets, complex borrowers, and unusual deal structures — but they cannot work with an unconvincing exit. The exit is how the bridge loan is repaid, and a lender who does not believe the exit will materialise on time has no basis to advance funds, regardless of asset quality.
What makes an exit strategy strong or weak is largely about specificity, credibility, and the degree of control the borrower has over whether it happens:
| Exit Type | Strong Version | Weak Version |
|---|---|---|
| Refinance to conventional term debt | Existing property already qualifies for institutional financing; borrower has received a preliminary commitment or passed a pre-screening; the only barrier to permanent financing is a timing gap the bridge fills | Borrower assumes the property will qualify at stabilisation with no lender engagement, no pre-screening, and no analysis of what DSCR, occupancy, or income level the term lender requires |
| Sale of the property | Property is actively marketed or under a conditional purchase agreement; borrower has recent comparables supporting the asking price; sale proceeds clearly exceed the bridge balance | Borrower intends to list the property “when the time is right” with no signed agreement, no active marketing, and no pricing analysis to confirm sufficient equity |
| Sale of a separate asset | Separate property is already listed and under a firm or conditional agreement; proceeds are clearly sufficient and timeline aligns with bridge term | Separate property has not been listed; no purchase agreement; borrower expects to sell “within 12 months” with no supporting evidence |
| Construction take-out financing | CMHC application is underway or a term lender has issued a preliminary commitment; occupancy permit timeline is defined; bridge term is structured to cover the gap to insured take-out | Borrower expects to arrange term financing once the building is done with no advance lender engagement and no committed take-out |
| Lease-up to stabilisation | Property is well-leased with signed letters of intent or tenant heads of agreement; achievable rents are supported by market comparables; the income level required for term refinancing is modelled and achievable within the bridge term | Property is vacant; borrower expects to fill it based on general market optimism with no leasing agent, no prospects, and no analysis of how long lease-up typically takes in that submarket |
The common thread in every strong exit is evidence — signed documents, advance lender engagement, market support, and a timeline that the borrower can defend with data rather than optimism. Lenders are experienced at distinguishing between borrowers who have done the work and those who are hoping things will work out.
Before submitting a bridge loan application, prepare a written exit memo. One to two pages covering: how the bridge will be repaid, by whom, on what timeline, what evidence supports that timeline, and what the Plan B is if the primary exit takes longer than expected. A borrower who can articulate their exit clearly and specifically is in a fundamentally stronger position than one who cannot.
What happens if I can’t repay a bridge loan on time in Canada — extension, default, and enforcement?
This is the question bridge borrowers most need to understand before signing a commitment letter, and the one most rarely discussed on lender and broker websites. The cost of a bridge loan is manageable when the exit executes on time. When the exit is delayed, costs compound quickly — and if the loan matures without repayment, the consequences range from expensive to severe.
Step 1 — Extension
Most bridge lenders will consider an extension if the borrower’s exit strategy is still credible but the timeline has slipped. Extensions are not automatic rights — they are negotiated concessions, and lenders charge for them. A standard extension carries a fee of 0.5% to 1.5% of the loan amount, payable upfront, plus continuation of the existing interest rate. The lender will reassess the property and the exit before agreeing to extend. Borrowers who communicate early — before the term expires — are consistently better positioned to negotiate extension terms than those who approach the lender at maturity.
Step 2 — Default Interest
If the loan matures and is not repaid or extended, the lender can invoke the default interest provisions of the mortgage. Default rates are significantly higher than the contract rate — typically two to five percentage points above the regular rate, or as specified in the loan agreement. Default interest accrues daily. On a $3M bridge loan already running at 10%, a default rate of 15% adds approximately $12,500 in interest per month above the original cost. The longer the default period, the larger the gap between the loan balance and the property value required to cover it.
Step 3 — Enforcement
A lender who cannot recover through extension or negotiation can move to enforce the security — typically a first mortgage on the subject property. In Canada, mortgage enforcement follows provincial law: foreclosure in BC and Alberta, power of sale in Ontario. Power of sale is the more common mechanism for institutional and private commercial lenders in Ontario; it moves faster than foreclosure and does not require court proceedings to the same degree. Enforcement timelines vary by province but typically run four to six months from notice to sale. The borrower retains the right to redeem the property by paying the full amount owing at any point before completion of the sale.
The practical implication for bridge borrowers is that the buffer between the bridge loan balance and the property value — the equity — is the only protection against a forced sale loss. A property worth $4M with a $3M bridge loan has $1M of equity cushion. If the property declines in value during the bridge period, or if default interest accumulates for several months before enforcement proceeds, that cushion can be significantly reduced before the borrower realises the exposure.
How fast can a commercial bridge loan close in Canada — and what actually controls the timeline?
Bridge lending is fast relative to conventional commercial financing — but “fast” means different things depending on the lender type, deal complexity, and how well the borrower’s file is prepared. The range in practice is two to four weeks for straightforward deals with experienced private lenders, and four to eight weeks for more complex transactions or deals going through alternative institutional lenders with a fuller due diligence process.
What actually drives the timeline, in order of impact:
Appraisal — Typically the long pole in the tent (7–14 days)
Almost every bridge lender requires a current commercial appraisal before funding. The appraiser’s availability and turnaround time set a floor on the closing timeline that nothing else can accelerate past. For simple single-use properties in major markets, a rush appraisal can be completed in five to seven business days at a premium. For complex or specialty assets, two to three weeks is more realistic. Engaging the appraiser on day one — before the term sheet is even signed — is the single most effective way to shorten the overall timeline.
Lender type (3–10 days difference)
Private bridge lenders — individuals, syndicates, and mortgage investment corporations — make credit decisions faster than institutional alternative lenders because their approval process involves fewer people and no credit committee cycle. A private lender with a strong existing relationship can issue a term sheet in 24 to 48 hours. An alternative institutional lender may take five to ten business days for internal credit review. Speed and relationship are why experienced borrowers and brokers maintain active connections with the private lending market rather than relying solely on institutional sources for time-sensitive deals.
Environmental and title issues (variable, 0–21 days)
A clean Phase I environmental report on a straightforward commercial property adds five to ten business days. If the Phase I identifies a Recognized Environmental Condition (REC) requiring a Phase II investigation, the timeline extends by three to six weeks, and some lenders will not fund until the Phase II is complete and reviewed. Title issues — outstanding liens, easements requiring discharge, or registration backlogs in high-volume land title offices — can add unpredictable delays. Title searches should be ordered on day one to identify issues before they become closing blockers.
Borrower file completeness (0–10 days saved or lost)
A borrower who arrives with a complete information package — financial statements, corporate documents, property details, and a clear written exit strategy — can move from initial contact to term sheet in 48 hours. A borrower who provides information piecemeal over several days extends the timeline by exactly how long it takes to collect each missing piece. In time-sensitive transactions where every day matters, file completeness is the variable the borrower controls entirely.
Legal documentation (5–10 days)
Once conditions are satisfied, legal documentation — mortgage preparation, registration, and fund disbursement — typically takes five to ten business days. Using a lawyer experienced in commercial mortgage transactions materially reduces the time spent on back-and-forth over standard clauses. First-time bridge borrowers who engage a lawyer unfamiliar with commercial lending documentation can add a week or more to the legal phase alone.
Realistic full timeline for a well-prepared bridge transaction: 14 to 21 business days for a straightforward deal with a private lender where the appraisal and environmental report are ordered immediately. 25 to 35 business days for a more complex asset or institutional bridge lender. Any environmental, title, or borrower documentation issue can extend these timelines materially.
What is the difference between a commercial bridge loan and a private commercial mortgage in Canada?
Bridge loans and private commercial mortgages are related products — both are short-term, asset-secured, and priced above conventional financing — but they are not the same instrument, and using the wrong term when approaching a lender or broker can lead to mismatched expectations about structure, pricing, and use case.
| Feature | Commercial Bridge Loan | Private Commercial Mortgage |
|---|---|---|
| Primary purpose | Solves a specific, defined timing gap between two financing states — the “bridge” connects Point A (current need) to Point B (permanent solution) | Provides term financing to a borrower or on an asset that conventional lenders will not touch — not necessarily temporary |
| Expected duration | 6 to 24 months by design — the intent to exit at a defined point is baked into the structure | Can be 1 to 3 years; sometimes renewed; may not have a hard exit plan built in from day one |
| Exit strategy requirement | Central underwriting criterion — lenders will not fund without a credible, defined exit | Important but less rigidly required — some private lenders are comfortable with open-ended term lending against strong collateral |
| Deal driver | Speed and timing — the defining value proposition is closing faster than conventional channels | Access and flexibility — the value is serving borrowers or assets that conventional lenders will not approve, regardless of timeline |
| Lender type | Specialist bridge lenders, MICs, alternative institutional lenders with a construction / transitional focus | Private individuals, family offices, MICs, private equity — a broader spectrum of capital sources |
| Pricing | Prime + 3% to 6%; fees of 1% to 3%; total effective cost high but finite given the short term | Similar rate range; fees may be lower on longer-term deals; total cost higher over a multi-year term |
| Overlap | In practice, many bridge loans are funded by private lenders, and many private mortgages serve a bridging function. The distinction is primarily conceptual — what matters is the deal structure and exit, not the label. | |
The most useful way to think about the distinction: a bridge loan is defined by its purpose (bridging a gap) and its exit (a defined repayment event). A private mortgage is defined by its source of capital and its ability to serve situations conventional lenders decline. The two overlap significantly — but when approaching a broker or lender, describing your situation in terms of the gap you need to bridge and how you intend to repay is more useful than trying to categorise the product type first.
How do bridge lenders assess a value-add property with no stable income in Canada?
Value-add acquisitions, properties purchased specifically because they are underperforming, vacant, distressed, or in need of repositioning, are one of the most common use cases for bridge financing. They are also among the most carefully scrutinised, because the lender cannot rely on current income to underwrite the loan in the conventional sense. Understanding what bridge lenders actually look at in a value-add deal helps borrowers prepare the right information and frame the transaction in terms that make it approvable.
When there is no current income, bridge lenders shift their underwriting to three questions:
1. What is the asset worth today, as-is?
The starting point for bridge underwriting is always the current appraised value of the property in its present condition — not the projected value after improvements. The loan-to-value test is applied against the as-is value, not the as-complete value. This is a critical distinction: a property that appraises at $2M today but is projected to be worth $4M after a $1M renovation does not qualify for a $2.8M bridge loan on the basis of the projected value. The lender advances against what the asset is worth now — because that is what they would realise in a forced sale if the repositioning fails.
2. What is the stabilised income potential, and how credible is it?
Lenders assess the property’s income-earning capacity at stabilisation — the rents achievable, the occupancy level required to service institutional term debt, and the timeline to reach that state. This analysis is only as credible as its support. Market rental rate comparables from a qualified appraiser or leasing agent carry weight. A borrower’s optimistic projections without third-party support do not. Signed letters of intent from prospective tenants, even conditional ones, materially strengthen the stabilised income case.
3. How executable is the value-add plan?
The improvement plan needs to be specific, costed, and within the borrower’s demonstrated capability to execute. Lenders want to understand what physical improvements are planned, what they will cost, how they are being funded (typically from borrower equity, bridge loans generally do not fund renovation costs on value-add acquisitions), and what operational changes are required to drive occupancy. A borrower with a track record of completing similar repositioning projects presents materially lower execution risk than one for whom this is a first attempt.
The exit strategy on a value-add bridge deal is typically refinancing to conventional or CMHC term debt once the property is stabilised — which means the borrower must understand not just what the asset needs to achieve, but what specific income, occupancy, and DSCR thresholds the intended term lender requires before they will engage. Working this analysis backwards from the term financing requirement — and demonstrating that the improvement plan leads there — is what separates a fundable value-add bridge application from one that generates lender scepticism.
How do bridge lenders assess a partially occupied commercial property during lease-up in Canada?
Lease-up bridge financing applies to a specific scenario: a recently completed or recently acquired commercial property that is partially occupied and generating some income, but not yet at the occupancy level required to qualify for conventional institutional term financing. The asset is past the construction or acquisition risk but not yet stabilised — it exists in the gap between completion and institutional bankability.
Bridge lenders approach lease-up assets differently from fully vacant value-add properties because there is actual income to assess, a track record of leasing velocity to review, and a clear, measurable gap to close. The underwriting focuses on:
What lenders look at positively
- Current occupancy and in-place rent roll. Actual signed leases with confirmed tenants, lease terms, and rent amounts give lenders something to underwrite. The stronger the covenant of the tenants in place, the better — a 60% occupied building anchored by strong-credit national tenants is a very different risk profile from a 60% occupied building with month-to-month tenancies
- Leasing velocity and pipeline. How quickly has the property leased since completion or acquisition? Are there letters of intent or heads of agreement with prospective tenants that demonstrate active demand? A building that has gone from 0% to 60% occupied in six months presents a different story than one that reached 60% in three years
- Market vacancy comparables. Is the subject property’s occupancy consistent with submarket performance, or does it underperform the local market? Properties that lag comparable assets in the same submarket require explanation
- Occupancy required for institutional take-out. Lenders will assess whether the gap to institutional bankability — typically 85–90% occupancy for most commercial asset types — is achievable within the bridge term
What lenders assess carefully
- Lease expiry concentration. A building where most of the in-place leases expire within the next 12 months creates significant re-leasing risk — the “current” occupancy may not be durable, and the lender’s collateral position could deteriorate rapidly
- Tenant quality and credit. Gross rent from a single-location independent operator carries more risk than rent from an investment-grade national tenant. Lenders discount income from weaker covenants in their underwriting
- Operating cost coverage. Does the in-place income cover the property’s operating costs, property taxes, and at least partial interest service during the lease-up period? A property with 60% occupancy that generates negative cash flow requires the borrower to fund the shortfall from external sources, which affects how the lender assesses liquidity risk
- Reason for below-market occupancy. Is the property vacant due to the normal new-building lease-up lag, or is there a structural problem — location, design, pricing, or market demand — that makes stabilisation genuinely uncertain?
The lease-up bridge loan is typically sized against a blend of current income and supportable stabilised income; the lender will not advance against the full projected stabilised value, but they will give credit for a trajectory that is demonstrably moving in the right direction. A borrower who can show signed leases, a pipeline, market comparables, and a clear model showing when the property reaches institutional DSCR is well-positioned. One who can show only potential without evidence is not.
What does recourse mean on a commercial bridge loan in Canada — and when does a lender require it?
Recourse and non-recourse are terms that describe the lender’s ability to pursue a borrower’s personal or corporate assets beyond the mortgaged property if the loan defaults and the security is insufficient to cover the full amount owing. Understanding where the loan sits on this spectrum matters significantly for how the borrower’s personal risk exposure is structured.
Recourse Loans
A recourse bridge loan includes a personal guarantee — the borrower commits that if the property’s sale proceeds do not cover the full outstanding loan balance, they are personally liable for the shortfall. The lender can pursue the borrower’s personal assets — other real estate, investment accounts, business assets — to recover the deficiency.
Most commercial bridge loans in Canada are recourse. Personal guarantees are standard from private lenders and the majority of alternative institutional lenders, particularly where the borrower is an individual or a small operating company without substantial standalone balance sheet strength. Lenders view the personal guarantee as an alignment mechanism — it signals that the borrower is personally committed to the exit and has a financial stake in ensuring it executes cleanly.
Non-Recourse Loans
A non-recourse bridge loan limits the lender’s recovery to the mortgaged property — if the security is insufficient to repay the loan, the lender absorbs the loss and cannot pursue the borrower personally beyond the collateral.
Genuinely non-recourse commercial bridge lending is less common in Canada and is typically reserved for: large institutional borrowers with significant balance sheet strength who negotiate non-recourse terms explicitly; specific CMHC-insured multi-family structures where the program design limits personal liability; or transactions where the asset quality and LTV are strong enough that the lender is comfortable with property-only security. Borrowers who are offered non-recourse terms at normal market LTV levels should read the loan agreement carefully — some instruments that are framed as non-recourse contain carve-outs that create personal liability in specific circumstances (fraud, environmental liability, misrepresentation).
In practice, the factors that influence whether a lender requires a personal guarantee on a bridge loan are:
- LTV ratio: At 55–65% LTV with strong asset quality, some lenders will accept a corporate guarantee without a personal guarantee. Above 70% LTV, a personal guarantee is almost universally required.
- Borrower track record: Experienced developers and investors with established relationships and proven exits sometimes negotiate guarantee limitations or caps. First-time borrowers with a specific lender rarely do.
- Exit certainty: A bridge loan against a property under a firm sale agreement carries less exit risk and may attract more flexible guarantee terms than a bridge against a property in early-stage repositioning.
- Deal size and lender type: Institutional bridge lenders on larger transactions have more flexibility in structuring guarantees than private lenders on smaller deals.
Can I use a bridge loan to close on a new commercial property before my existing property sells in Canada?
Yes — this is one of the most straightforward and most common applications of bridge lending in Canadian commercial real estate. The scenario is a classic timing gap: a borrower has identified a property they want to acquire, but the proceeds that would fund the purchase are locked in another asset that has not yet sold. The bridge loan provides the capital to close the acquisition; the loan is repaid when the existing property is sold.
Lenders are generally comfortable with this structure because both legs of the transaction are reasonably defined — there is an identified purchase, an identified source of repayment, and a borrower who has demonstrated they understand both sides of the deal. What lenders assess is whether the exit is reliable:
Factors that strengthen the application
- Existing property is already sold under a conditional or firm purchase agreement. This is the strongest possible version — the exit is essentially locked in and the bridge is simply covering the gap between closing dates. Many lenders will advance quickly and on better terms when a purchase agreement is already in hand
- Existing property is listed at a realistic price with active buyer interest. A property listed with a competent agent at or below market comparables in a functioning market is a credible exit, even without a signed agreement
- Substantial equity in the existing property. If the property being sold has low or no existing mortgage, the sale proceeds clearly exceed the bridge loan balance by a comfortable margin, reducing the lender’s recovery risk significantly
- Bridge term aligned to the realistic sale timeline. A 12-month bridge on a property that realistically sells in six months has a built-in buffer. A six-month bridge on a property that typically takes nine months to sell in that market creates unnecessary extension risk
If the existing property is already under a conditional purchase agreement, bring that agreement to the lender conversation. It transforms the exit from a projection into an evidence-backed commitment and can materially improve both the approval timeline and the pricing you receive on the bridge loan.
Factors that create underwriting difficulty
- Existing property has a large first mortgage that substantially reduces net sale proceeds. If the sale must cover both the existing mortgage discharge and the bridge loan repayment, the equity available for repayment may be thin — particularly if the bridge is at moderate to high LTV
- Existing property is in a slow or illiquid market. Rural, secondary, or specialty assets can take longer to sell than urban commercial properties. A lender will assess the realistic timeline in the specific market — not a generic assumption about how long it takes to sell commercial real estate
- Existing property has not been listed and the borrower has no immediate plan to sell. A bridge loan whose exit depends on an eventual sale at some undetermined point in the future is not a bridge loan — it is term financing with an optimistic repayment assumption
What are lender fees on commercial bridge loans in Canada and how are they structured?
Lender fees on commercial bridge loans are a material component of the total transaction cost and are structured differently from fees on conventional commercial mortgages. Understanding the fee structure before committing to a term sheet is important — the same headline interest rate can produce very different all-in costs depending on how and when fees are collected.
| Fee Type | Typical Range | When Payable | What It Covers |
|---|---|---|---|
| Origination / Commitment Fee | 0.75% – 2.5% of loan amount | At funding (deducted from advance) | Lender’s cost of underwriting, committing capital, and setting up the facility. The primary fee on most bridge transactions. |
| Lender Legal Fee | $5,000 – $15,000+ | At funding | Lender’s own legal counsel to prepare and register the mortgage. Payable by the borrower. Separate from the borrower’s own legal costs. |
| Administration / Servicing Fee | 0.25% – 0.50% per annum, or flat monthly | Monthly during the loan term | Ongoing loan monitoring, draw administration (if applicable), and servicing. Not always charged — more common on larger or more complex facilities. |
| Extension Fee | 0.50% – 1.50% of loan amount per extension | At extension, payable upfront | Lender’s compensation for extending the commitment beyond the original term. Typically covers a 3–6 month extension. Not automatic — requires lender approval. |
| Exit / Discharge Fee | Nil to 0.50% | At repayment | Some lenders charge a fee at loan discharge, particularly on early repayment. Less common than origination fees. Review the commitment letter for prepayment provisions. |
| Appraisal / Environmental | $3,500 – $15,000+ | At the application or funding | Third-party reports ordered by the lender. Payable by the borrower regardless of whether the loan ultimately funds. Confirm whether these are refundable if the lender declines to proceed. |
Two fee structure issues that borrowers frequently miss when reviewing term sheets:
Fees deducted from the advance vs. fees payable in cash. When a lender’s commitment fee is deducted from the loan advance, the borrower receives less than the loan’s face value but pays interest on the full amount. On a $3M bridge loan with a 1.5% fee deducted at funding, the borrower receives $2,955,000 but pays interest on $3,000,000 for the full term. This is standard practice, but confirming the net advance is important for transaction planning.
Fee transparency and comparison across term sheets. When comparing competing bridge loan offers, convert everything to a total cost over the expected hold period, rate, all fees, and projected legal costs. A slightly higher rate with lower fees can produce a lower total cost than a lower rate with a larger origination fee, depending on the term length.
Ask specifically for the full fee disclosure at the term sheet stage, not just the interest rate. A commercial mortgage broker reviewing competing term sheets will identify the total cost of each offer and present the comparison clearly. This is one of the most practical ways a broker adds value in bridge lending: translating headline economics into apples-to-apples total cost comparisons.