A LIHTC bridge advances capital against the syndicated equity pay-in schedule on a 9% or 4% LIHTC deal. The bridge is secured by the equity capital contributions and typically funds at construction start. Take-out occurs as the syndicator funds equity tranches at construction milestones, lease-up, and 8609 issuance.
LIHTC bridge structure and how senior debt and equity are coordinated
Tax credit programs change with IRS, Treasury, NPS, and CDFI Fund guidance. This page is sponsor-POV process commentary, not tax or legal advice. Engage tax counsel and a tax-credit syndicator for every transaction before relying on the mechanics described.
Equity pay-in schedule: LIHTC syndicators typically fund equity in tranches tied to project milestones, closing, construction-completion benchmarks, certificate of occupancy, lease-up to a defined occupancy threshold, and final 8609 issuance. Each tranche is contingent on the milestone being met to a defined standard.
Why a bridge loan is needed: the equity pay-in schedule is back-loaded relative to the construction draw schedule. Hard costs are largest in months 6 to 18 of construction; equity pay-ins concentrate at lease-up and 8609 (months 24 to 30). A bridge fills the gap by advancing capital against the future equity pay-ins.
Take-out mechanics: as the syndicator funds equity tranches, those funds first repay the bridge before flowing into the project's working capital. The bridge typically pays off in full at the lease-up tranche or at 8609 issuance.
Senior construction loan layering: the senior construction loan (often HUD 221(d)(4) or a bank construction line) sits ahead of the bridge for collateral purposes. The intercreditor between the senior construction loan, the LIHTC equity, and the bridge is the central document. Properly structured, all three layers fund and unwind cleanly across the construction-to-stabilization timeline.
Sponsor placement playbook: on a 9% LIHTC deal, the bridge is rarely the largest single capital source but is the most timing-sensitive. Engage the bridge lender early in the closing checklist; coordinate the equity pay-in schedule, the construction draw schedule, and the bridge sizing in a single integrated model.
Sources
- Low-Income Housing Tax Credit (IRC §42) · U.S. Internal Revenue Service · current
- LIHTC Program Resources and Database · U.S. Department of Housing and Urban Development · current
- Section 221(d)(4), Multifamily New Construction & Substantial Rehabilitation · U.S. Department of Housing and Urban Development · current