Commercial real estate rarely arrives in perfect, ready-to-finance condition. Properties need repositioning. Leases need stabilizing. CMHC approval takes months. The gap between where a property sits today and where it needs to be for conventional financing — that’s exactly where commercial bridge loans do their work.
This isn’t the same as a residential bridge loan that floats you between selling your old house and closing on the new one. Commercial bridge financing is a purpose-built tool for acquisitions, value-add projects, and transitions between financing stages. The deals are bigger, the terms are more complex, and the lender landscape is completely different.
Here’s how commercial bridge loans work in Canada, who provides them, and how to use them strategically to execute deals that conventional financing simply can’t touch.
What Is a Commercial Bridge Loan?
A commercial bridge loan is a short-term, asset-secured loan used to finance the purchase or hold of a commercial property during a transitional period. The “bridge” is literal — you’re bridging the gap between the property’s current state and the permanent financing that replaces it.
Here’s what defines a commercial bridge loan:
- Short terms: 6 to 24 months, occasionally up to 36
- Higher rates: 7–12% in Canada, depending on risk profile
- Conservative LTV: 65–75% of as-is value (not future stabilized value)
- Speed: Closes in 5–15 business days vs. 4–8 weeks for conventional
- Interest-only payments: Preserves cash flow during the transition period
- Exit requirement: Every bridge lender needs a defined repayment plan before they fund
That last point matters more than anything else. More on that shortly.
When Canadian Investors Use Commercial Bridge Financing
Acquiring a Property Before It’s Stabilized
This is the most common use case. You’re buying a property that’s under-occupied, has below-market rents, or needs capital work. Conventional lenders — including CMHC — require stabilized occupancy (typically 85–95%) before advancing full proceeds. A bridge loan lets you close now, execute your business plan, and refinance once the property qualifies.
Here’s a real example of how this plays out: A 24-unit apartment building in Hamilton is sitting at 70% occupancy. A bridge loan closes in 10 days at 65% of current appraised value. Over 12 months, the owner fills vacancies, normalizes rents, and hits 95% occupancy. The property now qualifies for CMHC MLI Select at 85% LTV. That CMHC loan pays out the bridge lender in full.
Value-Add Repositioning
Properties that need significant capital work — unit upgrades, common area renovations, systems replacement, re-tenanting — don’t qualify for conventional financing at post-renovation values. Bridge financing covers the acquisition, and in many cases includes a renovation holdback advanced as work is completed and verified.
I’ve seen investors in Toronto and Calgary use this approach to take tired 1980s apartment buildings and turn them into cash-flowing assets worth 30–40% more than the purchase price. The bridge loan made the deal possible. The renovation created the value.
Carrying a Property Through Lease-Up
A newly constructed or recently renovated building has physical vacancy even when demand is strong. Construction lenders have been repaid, and the permanent lender won’t advance full proceeds until occupancy covenants are met. Bridge financing carries the asset through this interim period until the numbers qualify for long-term financing.
Bridge to CMHC
This is one of the most powerful strategies available to Canadian multi-family investors right now. CMHC insured programs — particularly MLI Select — offer the best long-term rates and the highest LTV (up to 85%), but the approval process takes 3–6 months and requires stabilized operations.
Sponsors who want to move fast on an acquisition use a bridge loan to close immediately, then pursue CMHC approval during the bridge period. Done right, you end up with institutional-grade long-term financing at rates no conventional lender can match.
Three things to plan carefully with this strategy:
- Confirm the property will qualify for CMHC before committing to the bridge
- Give yourself enough runway — 12 to 18 months is safer than 6
- Understand your bridge lender’s extension options in case CMHC approval runs long
Bridge to Conventional Refinance
Not every property qualifies for CMHC. Office, retail, industrial, mixed-use, and hotel assets typically refinance into conventional commercial mortgages from banks or credit unions. Bridge financing buys time to stabilize cash flow, build an operating track record, and meet the debt service coverage (DSC) and LTV requirements those lenders need.
Winning Competitive Deals on Speed
Competitive commercial markets reward speed. When a prime asset hits the market and the seller wants to close in two to three weeks, a buyer with committed bridge financing has a real edge over buyers waiting on conventional underwriting. The cost of the bridge — typically 1–2% in fees plus a rate premium — is often worth it to win a deal you’d otherwise lose.
Your exit strategy is what makes or breaks a bridge deal — book a free strategy call with LendCity and we’ll stress-test your plan against what lenders actually need to see before they’ll fund.
Commercial Bridge Loan Rates and Fees
Interest Rates
Commercial bridge rates in Canada run from 7% to 12%. Most mid-quality deals with experienced sponsors land in the 8–10% range.
What pushes rates higher:
- Higher LTV
- Weak current occupancy or cash flow
- Smaller deal size (under $2M)
- Sponsor with limited track record
- Secondary or tertiary market location
- Complex property type (hotel, mixed-use, special purpose)
What pulls rates lower:
- Conservative LTV (under 60%)
- Strong existing cash flow
- Institutional-quality property in a primary market
- Sponsor with a solid track record and balance sheet
- A clear, credible exit strategy with committed permanent financing
Fee Structure
Bridge lenders charge fees on top of the interest rate. Expect:
- Origination/lender fee: 1–2.5% of the loan amount, charged at funding
- Exit/renewal fee: 0.5–1% on repayment or renewal
- Extension fee: 0.25–0.5% per 3-month extension
- Appraisal: $3,000–$8,000 for commercial, at your cost
- Legal fees: Both lender and borrower legal costs are on you
Here’s what a real deal looks like. On a $5M bridge loan at 9% for 12 months:
- Interest: $450,000
- Origination fee (1.5%): $75,000
- Legal + appraisal: $15,000
- Total 12-month cost: ~$540,000
That’s real money. But weigh it against the value the deal creates — on a well-executed value-add, the upside is typically much larger.
LTV by Property Type
| Property Type | Typical Bridge LTV |
|---|---|
| Multi-family residential | 70–75% of as-is value |
| Industrial / warehouse | 65–70% of as-is value |
| Retail (strong tenancy) | 60–70% of as-is value |
| Office (stabilized) | 60–65% of as-is value |
| Mixed-use | 65–70% of as-is value |
| Hotel / hospitality | 55–65% of as-is value |
| Development land | 50–60% of appraised land value |
These are all as-is LTVs — based on current value and current occupancy, not projected stabilized value. Lenders may structure a holdback against future value, but the initial advance is always based on what the property is worth today.
Who Provides Commercial Bridge Financing in Canada
Private lending companies are the backbone of the Canadian commercial bridge market. These range from boutique lenders doing 5–15 deals per year to larger platforms deploying tens of millions monthly. They work through commercial mortgage brokers and have established processes for commercial underwriting, appraisals, and environmental reviews.
Mortgage Investment Corporations (MICs) with commercial mandates participate in bridge lending, typically for multi-family and income-producing commercial properties. They’re slightly more conservative on LTV and rates than pure private lenders, but offer more institutional documentation.
Trust companies and alternative lenders bridge the gap between private capital and institutional lenders — faster than banks, more structured than private money.
Schedule I banks occasionally provide bridge financing for large deals ($10M+) to repeat clients with strong track records. These are relationship-based arrangements, not available through standard channels.
The market is broker-driven. Most commercial bridge lenders access deals through commercial mortgage brokers, not directly from borrowers. If you’re trying to source bridge financing on your own, you’re working harder than you need to.
Before you commit to that 9–10% bridge rate, let’s model your total cost against a CMHC takeout timeline — schedule a free strategy session with us and we’ll show you if the bridge-to-CMHC path saves you money long-term.
What Bridge Lenders Need From You
Commercial bridge underwriting is faster than conventional, but it still requires real due diligence. Here’s what you’ll need to provide:
- Purchase and Sale Agreement (or title documents if already owned)
- Current rent rolls with all existing leases
- Last 2 years of income and expense statements
- Recent appraisal (or one commissioned by the lender)
- Phase I Environmental Assessment
- Site plan and property description
- Sponsor profile: net worth statement, real estate CV, entity documents
- Business plan: value-add strategy and exit plan
- Identified permanent financing to replace the bridge
What bridge lenders skip or compress compared to banks: extensive personal income verification, deep credit history review, and full income tax analysis. The deal is the primary underwriting. Your exit strategy is the underwriting.
Your Exit Strategy Is Everything
Every commercial bridge lender’s most important question is simple: how do you get out?
Without a credible exit, a bridge loan is just expensive short-term debt with no end. Your exit must be realistic, documented, and achievable within the loan term. Don’t guess at this. Know it cold before you apply.
Exit 1: CMHC Insured Takeout
The gold standard for multi-family. Properties that qualify for CMHC MLI Select get the best permanent rates (currently 4.5–5.5% depending on term and program) and highest LTV (up to 85%). The CMHC loan pays out the bridge lender in full.
This works when the property meets CMHC’s program requirements, occupancy can be stabilized within the bridge term, and the stabilized appraised value supports a CMHC advance large enough to repay bridge proceeds.
Exit 2: Conventional Refinance
For properties that don’t qualify for CMHC — commercial, office, retail, industrial — the exit is a conventional commercial mortgage. These lenders require stabilized occupancy (typically 85%+), a debt coverage ratio of 1.20–1.30x, and a 12–24 month operating track record.
Exit 3: Sale
The property sells at its higher stabilized value, and bridge proceeds are repaid from sale proceeds. This is a clean exit for value-add investors who plan to sell rather than hold. Lenders want confidence in the asset’s marketability before they’ll accept this as a primary exit.
The Bridge-to-CMHC Strategy: Step by Step
This strategy has become a primary pathway for multi-family investors across Canada. Here’s exactly how it works.
Step 1: Find a property with below-minimum CMHC occupancy — typically under 85% for MLI Select — or one coming out of construction financing.
Step 2: Source bridge financing at 65–75% of current appraised value. Close fast. Take possession.
Step 3: Execute the business plan. Fill vacancies. Normalize rents. Complete capital improvements. Document everything — CMHC will want proof of stabilized operations.
Step 4: Engage a CMHC-approved lender within the first 3 months of your bridge term. Start the CMHC approval process in parallel with your operating period. Don’t wait.
Step 5: Submit for CMHC approval. Budget 3–6 months for a full CMHC appraisal, environmental review, and underwriting by the approved lender.
Step 6: Close the CMHC loan. The new loan pays out the bridge. You now have long-term, fixed-rate financing at 4.5–5.5% and 85% LTV.
The risk here is timeline slippage. If CMHC approval runs long, you need to either negotiate a bridge extension (at a cost) or have backup permanent financing ready. Build in buffer. Eighteen months of bridge runway is safer than twelve when you’re planning a CMHC exit.
Working with a mortgage broker who handles both commercial bridge and CMHC financing keeps both phases coordinated. Explore your commercial mortgage Canada options and multi-family mortgage financing to understand the full range of permanent financing available once you’ve stabilized.
Commercial Bridge vs. Other Short-Term Options
| Feature | Commercial Bridge | Construction Loan | Mezzanine Financing |
|---|---|---|---|
| Primary purpose | Transitional hold | Active construction | Gap between senior debt and equity |
| LTV | 65–75% as-is | 65–75% of total cost | 15–20% (subordinate) |
| Rate | 7–12% | 7–10% | 10–15% |
| Term | 6–24 months | 12–36 months | 12–60 months |
| Repayment | Bullet at term | Takeout loan | Bullet at term |
| Best exit | Conventional or CMHC refi | Permanent mortgage | Payoff from senior refi |
| Lenders | Private, MICs, some trusts | Private, trusts, banks | Private, MICs, family offices |
Frequently Asked Questions
What is a commercial bridge loan in Canada?
What interest rates do commercial bridge loans charge in Canada?
How quickly can a commercial bridge loan close in Canada?
What LTV can I get on a commercial bridge loan?
What is a bridge-to-CMHC strategy?
What documentation do commercial bridge lenders require?
Who provides commercial bridge financing in Canada?
What happens if I can't repay a commercial bridge loan at maturity?
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Consult a licensed mortgage professional before making any financing decisions.
Written by
LendCity
Published
March 15, 2026
Reading time
11 min read
Alternative Lender
An alternative lender is a non-traditional financing source, such as a mortgage investment corporation (MIC), private lender, or trust company, that provides loans outside of the conventional bank lending system. For Canadian real estate investors, alternative lenders are valuable when deals don't qualify for traditional financing due to credit issues, unconventional property types, or the need for faster, more flexible lending terms.
Appraisal
A professional assessment of a property's market value, required by lenders to ensure the property is worth the loan amount.
Below-Market Rent
Rental rates lower than comparable properties in the same area. Below-market rents represent a value-add opportunity where an investor can increase property value by raising rents to market levels.
Bridge Loan
A bridge loan (also called bridge financing) is a short-term financing solution that allows Canadian real estate investors to access the equity in their existing property to fund the purchase of a new property before the current one has sold. It "bridges" the gap between the closing date of a new purchase and the sale or [refinancing](/glossary/refinancing) of an existing property, typically carrying higher interest rates and lasting from a few weeks to one year.
Cash Flow Optimization
Cash flow optimization is the strategic process of maximizing the net income generated from a rental property by increasing rental revenue and minimizing operating expenses, mortgage costs, and vacancies. For Canadian real estate investors, this often involves tactics such as selecting the right financing structure, leveraging rental income from multiple units, and managing expenses like property taxes and maintenance to ensure the property generates consistent positive monthly returns.
Cash Flow
The money left over after collecting rent and paying all expenses including mortgage, taxes, insurance, maintenance, and property management. Positive cash flow is the primary goal of buy-and-hold investors. See also [NOI](/glossary/noi), [Cash-on-Cash Return](/glossary/cash-on-cash-return), and [Vacancy Rate](/glossary/vacancy-rate).
CMHC Financing
CMHC Financing refers to mortgage loans insured by the Canada Mortgage and Housing Corporation, which allows borrowers to purchase properties with a down payment as low as 5% by protecting lenders against default risk. For real estate investors, this government-backed insurance enables access to higher loan-to-value financing on qualifying properties, though it typically applies to owner-occupied or small multi-unit residential properties rather than purely investment purchases.
CMHC MLI Select
A CMHC program offering reduced mortgage insurance premiums and extended amortization (up to 50 years) for multifamily properties with 5+ units that meet energy efficiency or accessibility standards. Popular among investors scaling into larger apartment buildings.
CMHC
CMHC (Canada Mortgage and Housing Corporation) is a federal Crown corporation that provides mortgage loan insurance to lenders when borrowers have less than a 20% down payment, enabling Canadians to purchase homes with as little as 5% down. For real estate investors, CMHC insurance is available on owner-occupied properties of up to four units, but is generally not available for non-owner-occupied investment properties, meaning investors typically need at least 20% down and must seek conventional financing.
Commercial Mortgage
Financing for commercial properties like retail, office, or multifamily buildings with 5+ units, with different qualification criteria than residential mortgages.
Hover over terms to see definitions. View the full glossary for all terms.