What Are SBA Bridge Loans?

Several online resources mention “SBA bridge loans,” which might strike you as an odd combination of words—why would the Small Business Administration (SBA) have its own bridge loan? Well, the short answer is, it doesn’t.  You don’t need to worry about securing a bridge loan yourself when you apply for a 504 loan through a Certified Development Company (CDC) such as TMC Financing.

So if a bridge loan is not necessary to acquire or utilize a 504 loan, then why is this term floating around the internet? To help with any confusion, let’s go over what a bridge loan is, when it might be necessary to use during small business expansion, and how the 504 loan fits into the picture.

When Does a SBA 504 Loan Require a Bridge Loan?

A bridge (or hard money) loan is a short-term loan intended to fill a financial gap while waiting for other, more permanent financing. In the case of the SBA 504 loan  the bridge loan is an essential part of the lending process.

After your 504 loan has closed, but before it is funded through a debenture, a bridge loan is used to make that money available to you. It is paid off when the 504 loan is funded, approximately a month later. But this isn’t something you as the borrower need to worry about, as this is a behind-the-scenes transaction that doesn’t require anything additional from you.  Your participation is necessary to prequalify, apply and close the loan, but funding the bridge loans are handled by the lenders themselves.

When Should 504 Loan Borrowers Consider Bridge Loans?

If you see finance companies aside from CDCs offering loans they call “SBA bridge loans” to borrowers, be careful. They will often suggest that applying for an SBA loan is a reason to take out expensive secondary bridge loans as well. This is not the case at all.

You may also find these are also considered high-cost alternative forms of credit, such as a merchant cash advance, with suggested uses like paying off tax liens or covering payroll expenses. These are, in reality, high-priced solutions for business owners with few choices. Chances are, you will not require one of these.  

The only time a separate bridge loan might be helpful is to cover a gap in financing after the completion of ground up construction. In this instance, a bridge loan may be used when the construction financing has been fully disbursed but permanent financing is still on the way. It is important to note that if you secure a bridge loan for your construction project, it will be called simply a bridge loan, or gap financing not an “SBA bridge loan,” even if the permanent financing will come from the SBA.

You can find out more about the SBA 504 loan program from one of TMC Financing’s 504 loan experts. TMC is an SBA Premier Certified Lender and a high-volume loan provider. With over 35 years of experience, TMC can help you find the financing that is best for you and guide you through the 504 loan process. Contact TMC Financing today.


Barbara Morrison, a local small business advocate and civic leader, founded her first company TMC Financing in 1981. TMC is a Certified Development Company that provides commercial real estate financing to small business owners via the SBA 504 Loan Program. TMC consistently ranks among the top certified development companies nationwide, and has funded projects worth more than $9 billion across California and Nevada. Nearly 5,000 small businesses have benefitted from this financing, resulting in the creation of an estimated 50,000 jobs. TMC is also the No.1 SBA 504 hotel lender in the United States. Barbara is also the founder of Working Solutions, a Bay Area microlender whose mission is to provide micro entrepreneurs, particularly low-income individuals, women and minorities, with the access to capital and resources they need to start a successful business.
Barbara Morrison