SBA loans are a flexible, affordable funding option for small businesses, but they often take weeks or months to process. This is largely due to an extensive application process, strict requirements, and a high demand for these loans.

While you’re waiting for more permanent funding to come through, you might want to consider a business bridge loan. These are a fast, temporary solution that keeps business plans moving during the wait.

What is a bridge loan?

A business bridge loan is a short-term funding solution designed to help fill the gap while you wait for long-term, reliable financing to arrive. These loans provide more immediate cash flow for urgent expenses, like rent, payroll, or commercial real estate.

The trade-off for quick funding is that they typically come with high interest rates and shorter repayment terms—often no more than a year. This makes them better as a temporary solution, as opposed to SBA loans, which usually have more favorable terms and rates.

Taking out a bridge loan doesn’t necessarily disqualify you from SBA funding. However, government-backed loan programs often look at your overall financial situation when deciding whether to approve your application. This includes your debt-to-income (DTI) and debt-service coverage ratio (DSCR)—which indicates your ability to repay.

Before applying for a short-term business financing solution, make sure it won’t prevent you from securing a more permanent financing solution like an SBA 7(a) or 504 loan.

Why businesses use bridge financing.

Businesses use bridge loans—sometimes called gap financing—to handle short-term or pressing cash flow needs. They’re a stopgap until a long-term solution, like an SBA loan, comes through.

Bridge loans can help by:

  • Covering payroll or operating expenses while waiting for SBA loan approval
  • Purchasing inventory or equipment tied to time-sensitive opportunities
  • Locking in contracts before SBA funds are ready
  • Purchasing or constructing commercial property
  • Providing working capital in the midst of a major deal or sale (like an acquisition)

How a bridge loan helps while SBA funds are pending.

SBA loans exist to help small businesses get the funding they need to launch, grow, and thrive. Over the past handful of years, the SBA has provided loans (and grants) to 13 million small businesses.

But SBA loans can take time to process—sometimes around 90 days—and you might not be able to wait. While your application is pending, a business bridge loan can help with:

  • Fast approvals and quick funding (often same-day or next-day funding)
  • Flexible repayment structures (depending on lender)
  • Ability to preserve momentum instead of pausing commercial operations
  • Funds to secure an immediate opportunity

Key differences between bridge loans and SBA loans.

Business bridge loans and SBA loans are both designed to help fund your business, but here's how they differ:

  • Unlike SBA loans, bridge loans are a short-term business financing solution
  • Bridge loans are usually more expensive, with higher interest rates and other lender fees
  • SBA loan approval can take weeks or months, whereas bridge loans may be funded within a week or less
  • Bridge loans often have short repayment timelines of about a year (up to three years when used for real estate) vs. longer SBA terms (10 to 25 years)
  • Bridge loans don’t come with a federal guarantee, so lenders assess risk differently (and may charge more)

Know that both bridge loans and SBA loans can be used for an array of business needs, including:

  • Short-term working capital (and long-term for SBA loans)
  • Financing equipment, inventory, machinery, etc.
  • Purchasing property

Bridge loans may be either secured or unsecured. Some lenders require collateral—like property in the case of real estate acquisitions—in exchange for funds. SBA loan programs vary, but loans above $50,000 may require collateral or a personal guaranty.

What lenders look for in bridge loan applicants.

With any form of business financing, lenders want to know you can repay the amount borrowed on schedule. Requirements vary, but here’s what lenders typically look for in an applicant:

  • Strong cash flow and the ability to repay quickly
  • Clear evidence that an SBA loan is already in progress (especially if you’re planning on using the SBA loan to refinance current business debts)
  • Clear financial documentation and up-to-date bank statements
  • Good or excellent credit (aim for 740+)
  • DSCR of at least 1.25 or DTI below 50%
  • Sufficient collateral (like real estate or other assets)

If you’re using the bridge loan for real estate, lenders will also generally review the loan-to-value ratio (LTV). Most lenders only let you borrow up to 80% of the property’s value.

When a bridge loan makes sense.

A bridge loan might make sense for your business if:

  • You have a time-sensitive opportunity (like a great real estate deal)
  • You need to stabilize cash flow during the waiting period
  • You’re confident the SBA loan approval is on track
  • You’re sure of your ability to repay the loan in a short period (or else have the means to refinance it)
  • The benefits of the loan outweigh the costs
  • You have the required collateral

Note: If your business needs help recovering from a declared disaster, an SBA disaster loan may help.

Bridge loans: A possible short-term solution.

Bridge loans help small business owners move forward instead of waiting on lengthy SBA timelines. But they aren’t without risk. As a form of short-term business financing, they generally must be repaid within a few months or years. They also tend to come with higher interest rates and other fees that SBA loans don’t have.

Before choosing a bridge loan, weigh the benefits—like more immediate funds—against the costs. It helps to have a clear plan and exit strategy so you can make the most out of the loan while safeguarding yourself (and your business) against future complications.

Thinking about your business financing options? Check out Lendio’s marketplace today.