What is a Bridge Loan?

A bridge loan is a way to provide gap financing for a borrower. The term bridge refers to the gap between a company’s products or services sold and the payments that have been billed. A bridge loan provides a float for a business in order to meet their cash needs.

Short-Term Funding

Bridge loans provide short-term funding to fill in a gap between an anticipated revenue. They are used as a way for a business to meet their financing needs for such things as payroll, overhead expenses and other funding needs of the business.

Anticipation Loans

A bridge loan can also serve the purpose of helping a business begin a project in advance of an anticipated loan. The bridge loan is made by a lender who looks at the terms of an incoming financing agreement to determine the viability of the project or venture. The bridge loan offers a way for the business to begin work on the project immediately prior to the receipt of the long-term financing.

The risk of using a bridge loan as an anticipation loan is that if the funding does not come through, the loan may be payable immediately.