Bridge loans are short-term loans that are typically used as a temporary financing option until a more permanent financing solution can be obtained. They bridge the gap between the purchase of a new property and the sale of an existing one.
These loans are commonly used in real estate transactions when homeowners are looking to upgrade to a new property but have not yet sold their current one. The funds from a bridge loan can be used to cover the down payment and closing costs on the new property until the sale of the existing property is completed.
Bridge loans are also used by businesses to cover immediate financial needs or to fund specific projects while waiting for long-term financing to be secured. In such cases, they help businesses maintain operations, meet payroll, or take advantage of time-sensitive opportunities.
Bridge loans are typically short-term, with a duration of a few weeks to a few months, and are secured against the assets or property being purchased or sold. They are often associated with higher interest rates and fees compared to traditional loans due to their short-term nature and greater risk involved.