The lender of the bridge loan will usually be protected as the Loan is related to the value of the project/property. The value of the project usually increases as the different stages of construction of the property are completed, therefore lessening the lender’s risk. These are considered risky loans and usually the lenders have to be convinced about the buyers investment.

Compared to conventional loans from banks and other financial institutions, the interest rates charged for bridge loans are usually higher. This is because the costs and other fees are covered  over a shorter period of time. They are also more risky for the lender as less documentation is provided. Since the paperwork involved is less, the loans can be approved more quickly.

After a conventional loan has been approved or a new source of financing arranged, part of the funds are used to pay back the bridge loan.