Bridge Loans for Ranch & Farm Auctions
You see an ad for an auction, and it’s that dream home and farm you’ve wanted for years. But the sale is only a week away. What can you do? There’s no time to talk to the bank, is there? Wrong. There is time, and the conversation you need to have is about bridge loans.
For those unfamiliar with real estate auctions, auction loans, and the nuances these entail, it’s important to understand the various elements, including bridge lending. So, what is a bridge loan, and how does it play into auction finance? Read on to learn more about bridging loans.
Editor’s Note: This is not financial, investment, legal, or real estate advice. Consult with a loan officer, financial planner, investment specialist, real estate lawyer, and real estate professional before buying or selling land at auction.
What Are Bridge Loans?
Securing conventional loans can take a while to complete. That’s where bridge loans come into play. In simplest terms, bridge loans are temporary solutions for those needing to make a fast real estate purchase.
This is a short-term loan that can be secured very quickly. Ultimately, it helps secure the purchase price of a property until a long-term loan is in place. (Other times, depending on how quickly the property re-sells, a bridge loan might also remain intact until the buyer sells it.) Either way, it gives auction attendees a chance to receive the financing they need to buy the property they want at auction.
Bridge loans are open to many different types of land buyers. That said, most who secure these are in the agricultural realm. Being in the farming business, this loan type is commonly chosen by those seeking to increase their land portfolio.
Additionally, these are also used for farm expenses. For crop-centric farmers, these can help cover key business operation costs, such as seed, fertilizer, equipment, etc. For cattle farmers, it can buy livestock, feed, fencing, and more. Additionally, it can assist with unexpected costs, such as equipment repairs. It can even provide short-term aid between seasonal income gaps.
Other relevant examples surrounding when to inquire about bridge loans:
- Permitting fleeting land-buying opportunities
- Solving agricultural business emergencies (i.e.: irrigation systems during drought)
- Waiting on cash flow
- Waiting for grants, subsidies, or other aid
- Investing in sudden real estate opportunities
- Taking advantage of sudden price-drop opportunities
- Maintaining business operations (i.e.: payroll, supplies, etc.)
- Satisfying late or otherwise time-sensitive bills
Per some of the above examples, when used for farm expenses, this short-term loan is oftentimes paid back with the eventual selling of crops. That process occurs before the loan expires, effectively satisfying the terms and conditions of a loan.
Why Auction Attendees Consider Bridge Lending?
Auctions can be fast-paced events. Furthermore, some auction goers don’t learn of an auction until the last minute. Others know about it but make last-minute decisions to bid on a property. These reasons and other scenarios are good cases to consider bridge lending.
With auctions, winning bidders typically have up to 30 days to complete the purchase (sometimes less). Those unfamiliar with the loan process should know that conventional loans generally take about 45 days to process. However, it can take up to 60 days, and in some instances 90 days, to complete. Doing simple arithmetic, unless an auction attendee starts the process well before the auction, traditional bank loans can’t be completed in time to meet the auction closing deadline.
Bridge loans can be open and shut, start to close, in about a week. The typical window is approximately five to 10 days. This increased pace and shorter timeline makes it possible to meet shorter auction deadlines.
This loan type offers other advantages, too. First, these help buyers to go toe-to-toe with cash buyers. Essentially, it’s easier for a bidder to operate as a cash buyer would, even though they aren’t one. This makes them more viable at auctions, more attractive to sellers, etc.
Furthermore, some real estate opportunities happen quickly. With conventional loans, the approval process can be slow enough for aspiring buyers to miss brief but important windows. Land buying openings often close quickly, and bridge lending provides a time-sensitive answer to this riddle.
Interestingly, in some instances, it’s possible for bridge loans to finance real estate that might not otherwise qualify for a traditional loan. (Ask your loan officer to be sure.) One example includes properties that need repair. Ask your lender for details, but in some instances, bridge loans can carry the property in the short go until it qualifies for a conventional mortgage.
Simply, bridge loans are auction finance solutions. These can be deployed to cover deposits and remaining balances, effectively securing a property the buyer hoped to purchase.
Important Characteristics of Bridge Loans
As with any type of lending, it comes with important factors to know about. Most conventional loans place heavy emphasis on credit checks, income verification, assets assessment, and other important loan-securing details. In contrast, during the loan qualification process, bridge loans focus more on the property value, buyer plans (i.e.: exit strategy), overall risk assessments, and more.
Additionally, collateral is of note, too. Typically, this includes real estate (land), farm equipment, etc. It’s added protection for lenders in a higher-risk loan type category.
All said, “exit strategy” is perhaps the key term here. Lenders will require a very clear, detailed, and otherwise promising exit strategy. Assembling a strong plan for repayment is a must-have. The exit plan must be viable, low-risk, and otherwise timely.
Examples of an exit strategy:
- Long-term traditional farm loan
- Using land income proceeds (crops, livestock, etc.)
- Selling the property
And more
Once secured, bridge loans tend to last six to 18 months. Again, it’s not a long-term loan. Before it expires, borrowers will need to secure a traditional loan, pay off the bridge loan, or sell the property (and pay off the loan).
Those planning to secure long-term financing must plan this out. Research potential options, such as traditional farm loans, USDA farm ownership loans, and more. It requires additional steps, and more paperwork, but for some, this process is well worth the outcome of buying real estate of interest.
As potential borrowers might expect, bridge loans come with higher costs. That’s due to the short timeline loan approvals, increased risk for the lender, and more. Faster appraisals, origination, and other differences from traditional loans raise the cost of securing one.
According to most sources, the payment terms often are interest-only while the loan is in place. Then, at the end of the term, a large “balloon” or “lump sum” payment for the principal comes due.
Risks of Securing a Bridge Loan
Those looking to secure a bridge loan should understand the risks. Of course, going into debt — any kind of debt — comes with risks. To that point, being unable to transfer over to a long-term financing option, or sell the property to pay off the loan, can lead to a tight spot. That said, risks decrease with careful planning, proper execution, strong personal finances, and a firm handle on your income, assets, and overarching business or personal money management skills.
Securing a Bridge Loan
Those who hope to buy a rural home, buy land at auction, or address any number of the above relevant reasons, might consult their lender with questions. The pre-qualification process is still important, just as with obtaining a conventional loan. Therefore, contact a bridge loan lender, get pre-approved, and be able to show this pre-qualification, or existing proof of funds, on auction day.
Of course, with most auctions, approximately 10% to 20% of the sale price (plus the buyer’s premium) must be paid on the day of the sale. Bridge lending can make this possible for those who aren’t, or can’t be, cash buyers.
Those interested in bridge loans should contact Rural 1st today. You can even use it for buying that dream rural home.
“When you’re ready to build or buy your dream home in the country, Rural 1st is here to help,” says Rural 1st. “Our bridge loan allows you to put the equity from your current property toward your new home.
“The bridge loan is an add-on to your existing Rural 1st home mortgage or construction loan to help finance your next home,” it continued. “It can be used to purchase or build your dream home before selling your existing house.”
According to Rural 1st, its bridge loans offer “competitive fixed-rate, interest-only financing to help meet your needs. It can help provide funds to make moving a less stressful situation.” Its bridge loans come with a 12-month term.
For landowners looking to sell at auction, contact Ranch & Farm Auctions. We can answer questions and help with your auctioneering needs. For buyers hoping to purchase land, check out some of the upcoming Ranch & Farm Auctions near you.
Published on 2025-11-12