Bridge Loan
Bridge loans are loans intended to be used for a short period
of time between the initial requirement for funds and a
permanent, usually less costly, financial solution.
Bridge loans are typically funded by collateralized real
estate. There are typically very few limitations on the
uses of funds for a bridge loan, although lenders
will review the use to insure that payback can be met.
Example:
A company is doing a round of equity financing that is expecting
to close in six months. A bridge loan could be used to secure working capital
until the round of funding goes through. In the case of an individual, bridge
loans are common in the real estate market. As there can often be a time lag
between the sale of one property and the purchase of another, a bridge loan
allows a homeowner more flexibility.
