As bankruptcy attorneys, you’re seeing firsthand how higher interest rates and economic uncertainty are making traditional workouts and refinancing more difficult to secure. In today’s environment, lenders have become more conservative, underwriting standards have tightened, and viable refinancing options for distressed real estate owners have diminished significantly.
This has led many debtors—especially those with real estate holdings—to turn to bridge financing as a flexible, interim solution. At Edgewater Lending, we’ve been tracking these shifts closely and working with legal teams to support their clients with the kind of tailored, time-sensitive capital that standard lenders typically can’t offer.
Why Bridge Loans Are Gaining Traction in Bankruptcy
Bridge loans are short-term, asset-backed financing solutions that help borrowers navigate transitional periods—whether that’s restructuring debt, exiting bankruptcy, or preparing for a sale or refinance. In bankruptcy proceedings, they can serve as a lifeline for real estate owners who need time, liquidity, and flexibility while working through court-approved plans.
Bridge financing can play several roles in a restructuring or workout:
- Debtor-in-Possession (DIP) Financing
For Chapter 11 filings, DIP capital can help maintain operations, satisfy critical vendors, or fund required restructuring steps. While DIP loans require court approval, they often become a turning point in a debtor’s ability to retain control and stabilize. - Exit Financing
In confirmed plan scenarios, bridge capital can provide the necessary funding to satisfy creditor claims, pay off existing debt, or buy time while pursuing a long-term takeout loan or property disposition. - Time-Buying Tool for Negotiations
Whether used before or during a filing, bridge loans allow borrowers to avoid distressed sales, extend negotiations with creditors, or unlock liquidity from equity they’ve built over time.
What Bankruptcy Attorneys Should Consider
As an advisor to clients facing imminent loan maturities, stalled workouts, or foreclosure threats, it’s helpful to understand the key benefits—and limitations—of bridge financing:
✅ Speed
Unlike traditional lenders, private bridge lenders can underwrite and close quickly—often within 7–14 days. This speed can be crucial when foreclosure actions are pending or when a plan needs funding before court deadlines.
✅ Asset-Based Focus
Bridge loans typically focus on the value of the underlying real estate—not on borrower credit, income, or cash flow. This is especially helpful when a client’s financials are impaired by distress or legacy issues.
✅ Flexible Structure
Terms can be customized to fit the timing of a 363 sale, a Chapter 11 exit, or a pending refinance. Many bridge lenders are comfortable being part of complex capital stacks and navigating bankruptcy court procedures.
⚠️ Considerations
- Interest rates are generally higher than conventional debt
- Loan-to-value ratios are conservative (typically ≤ 65%)
- Exit strategy must be clear to ensure repayment
- Legal review is critical to confirm priority and compliance with court processes
Real-World Applications
We’ve seen bridge loans successfully applied in a wide range of bankruptcy-related scenarios, including:
- A retail center owner in Chapter 11 who needed to fund roof repairs and maintain tenant leases during reorganization
- A multifamily borrower whose loan matured mid-case and required DIP financing to avoid liquidation
- A small business owner who refinanced out of default post-confirmation, using bridge capital to stabilize before selling the asset at full market value
Conclusion: A Tool Worth Considering
Bridge financing isn’t right for every debtor—but in the right situation, it can be the difference between control and concession, value preservation and value loss.
If you’re advising a client who’s facing pressure from a maturing loan, a reluctant lender, or a stalled restructuring process, bridge financing may offer the time and liquidity they need to execute their plan.
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