Private Lending, Bridge Loans, and SBA: Which Tool Fits Which Deal?

Aug 5

Should you use private lending or go with SBA?

It's one of the most common questions I get from newer investors, and it's usually the wrong question to start with. Private lending, bridge loans, and SBA financing aren't competing options you have to choose between. They're different tools built for different stages of a deal, and once you know how to use them, much of the confusion around financing goes away.

I'm Debra Hayes, attorney and owner of MGM Private Capital. I've seen good borrowers lose time and solid deals by going to the wrong lender at the wrong moment. Not because they weren't qualified, but because nobody took the time to explain how these tools actually work or how they can fit together.

Here is a plain-language guide to what each one does, when to use it, and how they work as a sequence rather than a distinct choice.

What Does SBA Financing Actually Require?

SBA loans, both the 7(a) and the 504, are federally backed programs designed for established businesses with documented cash flow. They come with competitive rates and long repayment terms, which makes them attractive long-term financing tools. But they are not built for speed or for transitional assets. To qualify for a standard SBA 7(a) loan in 2026, borrowers must qualify as a small business under the SBA guidelines, and be able to demonstrate a reasonable ability to repay the loan (through credit history, cash flow, etc.). The 504 program carries similar thresholds and is primarily designed for fixed assets: owner-occupied commercial real estate and major equipment, not investor-held rental properties or transitional projects. Current SBA 7(a) rates are running approximately 8.5 to 14.0% as of mid-2026, which is competitive for long-term commercial debt. But the timeline is where many investors run into trouble.

How Long Does It Take To Close An SBA Loan?

A standard SBA 7(a) loan takes 60 to 90 days from completed application to funding. The 504 program routinely runs 60 to 120 days because it requires coordination between the borrower, a conventional lender, and a Certified Development Company (CDC). That's a meaningful timeline for an investor trying to hold a deal.SBA is not slow because of bureaucracy for its own sake. It's slow because the underwriting is thorough, and the documentation requirements are substantial. Business tax returns for two to three years, profit and loss statements, balance sheets, personal financials, and a demonstrated track record all come into play. None of that is a problem when the deal is stabilized, the income is established, and you have time to work the process. It becomes a problem when the deal isn't any of those things yet.

What Is Private Lending Built For?

Private lending operates outside the federal program structure. A private lender like MGM Private Capital lends its own capital, not bank funds or federally guaranteed money, which means decisions happen faster and underwriting looks at the deal itself, not just the borrower's tax returns. Private lending is purpose-built for transitional real estate. That means:

Properties that aren't rent-ready yet (fix and flip, rehab, new construction)
Properties with incomplete or inconsistent income history
Borrowers who need to close quickly to secure the deal

Bridge situations where the asset needs to be stabilized before it qualifies for conventional or SBA financing. Interest rates are higher than SBA, typically in the 10 to 14% range for experienced borrowers in Southeast Wisconsin, depending on the deal structure, loan-to-value, and exit timeline. But the cost of the rate isn't the right number to focus on. The right number is the total cost of capital against the projected return, which is a very different calculation.

Who is a good candidate for private lending?

Fix-and-flip investors, new construction borrowers, and anyone with a transitional commercial asset who needs capital while the property gets to a position where long-term conventional financing is possible. Experienced investors tend to know this intuitively. Newer borrowers sometimes don't realize there's a sequencing strategy available to them.

To learn more about which financing fits which deal, our article 4 Deals Your Bank Won't Touch, showcases exactly the transitional-asset scenarios described here.

What Is a Bridge Loan?

To learn more about which financing fits which deal, our article 4 Deals Your Bank Won't Touch, showcases exactly the transitional-asset scenarios described here.

How Private Lending and SBA Work Together

This is where the real value is, and where a lot of investors leave money on the table by thinking about these tools as competing options. Here's how sequencing works in practice:

Step 1: A borrower identifies a commercial property that isn't currently income-producing or stabilized: a vacant building, a restaurant that needs renovation, a mixed-use property with deferred maintenance. The property has strong potential, but no documented income and no track record to bring to an SBA lender.

Step 2: A private lender like MGM steps in with a bridge loan. The loan funds the acquisition and the stabilization, whether that's rehab, buildout, lease-up, or all three. Closings in this scenario often happen in days or weeks, not months.

Step 3: Over the bridge period, the property generates documented income. The business or operation running on the property builds a cash flow history. The borrower accumulates the tax return documentation an SBA lender needs.

Step 4: Once the asset is stabilized and the income history exists, the borrower refinances into an SBA 7(a) or SBA 504 loan — locking in a long-term rate with favorable terms. The private bridge loan exits, and the long-term financing takes its place. This isn't a workaround. It's the intended sequence for deals that start in a transitional state.

When does the sequence make sense?

It makes sense when the long-term fundamentals are strong, but the short-term picture isn't clean enough for an SBA underwriter. The private bridge creates the conditions the SBA product requires. It's worth noting that as of July 4, 2026, the SBA doubled the combined 7(a) and 504 cumulative limit from $5 million to $10 million, which expands the ceiling for borrowers who may eventually want to pair programs on larger commercial projects.

A Real-World Example: The Restaurant Operator

I had a conversation recently with an operator expanding a restaurant concept to a fourth location. The deal involved raw land and a construction project, no income, no building, and a business that, while profitable elsewhere, had no operating history tied to this specific property. An SBA lender couldn't touch it (yet). Not because the operator wasn't creditworthy — they were — but because the SBA's underwriting framework looks at the asset and its documented cash flow, not what the asset will produce once it's built and open. A private bridge loan made sense: fund the land acquisition and construction, carry the deal through buildout and opening, build six to twelve months of operating income, then refinance into an SBA 7(a), which is well-suited to owner-occupied commercial real estate with established cash flow. The private lender exits, and the borrower gets the long-term rate they were after from the beginning. The sequencing is the strategy. For a similar real-world transitional-deal case study, check out From Threshing Barn to Rental Income: A Recent MGM Deal in Mequon.

The Bottom Line

SBA financing is an excellent long-term tool for the right moment. The problem is that a lot of deals aren't at that moment yet when you need capital. Private lending, and bridge loans specifically, create the conditions that make SBA financing possible later. The investors who close the most deals in competitive markets aren't choosing between these tools. They're using them in sequence, with a clear exit strategy at every stage. If you're evaluating a deal that doesn't fit neatly into one financing box, that's often the right time to have a conversation. MGM Private Capital lends across Southeastern Wisconsin, including Milwaukee, Waukesha, Ozaukee, Washington, Racine, and Kenosha counties, and I'm happy to talk through what a deal structure might look like.

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Legal Disclaimer:
This article is provided for informational and educational purposes only and is not intended to constitute legal advice. Real estate regulations can be complex and situation-specific. Readers should consult with qualified legal counsel or a licensed attorney for guidance regarding their particular transaction or compliance obligations.

At MGM Private Capital, we actively support real estate investors across Southeastern Wisconsin with trusted capital options and offer opportunities for capital partners to grow alongside us.

Debra Hayes