What is a Bridge Loan?

A bridge loan is a short-term loan used until a person or company secures permanent financing or receives payment from another source. Bridge loans are a versatile financial tool but come with higher costs and risks compared to traditional financing options. Bridge loans are often used in real estate transactions to help buyers finance a commercial real estate finance purchase / construction project. They can also be used to bridge until some other liquidity event - e.g., equity investment or complete sale of the business.

Key features:

• Short-term: Typically last 6-12 months, sometimes up to 2-3 years

• Higher interest rates compared to traditional loans

• Usually backed by collateral (e.g., real estate, business inventory)

• Faster application, approval, and funding process than traditional loans