bridge loan

Bridge Loan

A loan for a short-term period, usually two weeks to three years, until long-term financing can be arranged or an obligation is removed. Interest rates are relatively high, often 12-15%. Bridge loans are used to satisfy working capital needs; for example, if a company is arranging for an IPO or a bond issue in the coming months, but needs capital before then, it may take out a bridge loan. In doing so, it will plan to pay back the bridge loan with the money raised in the longer-term financing.

bridge loan

A short-term loan that is taken out until permanent financing can be arranged. Also called swing loan.

bridge loan

A short-term loan intended to bridge the gap between other transactions. (1) Temporary financing obtained at the end of a construction loan period but before permanent financing can be arranged. (2) A loan obtained by a home buyer when the equity from an existing home is necessary to provide the down payment for a new home,but the buyer has been unable to sell his or her old home as of that time (frequently offered by employers who transfer employees to new cities).

Bridge Loan

A short-term loan,usually from a bank,that “bridges”the period between the closing of a home purchase and the closing of a home sale.

To qualify for a bridge loan, the borrower must have a contract to sell the existing house. This is the same as a “swing loan.” See Housing Investment/Buying the Next Home Before the Existing One
Is Sold.