What is bridging loan?
A bridging loan is a short-term loan that companies utilize in order to assure financing for closing a deal. Bridging loans are usually up to about year and as a result they include high interest rates and require collateral in the form of personal capital, real estate, or other assets. When your company needs financing, bridging loans serve as a way to give a company a short term fix which is usually a transitional step to a longer term loan. Bridging loans bring flexibility to the closing process and usually provide a temporary solution that buys time. They are not a long term solution but allow a time sensitive deal to be completed on schedule. A bridging loan is a high-risk loan because it provides capital for a very short amount of time in order to “bridge” the time between financing of a company. If the loan is not taken out by maturity, it usually creates a difficult situation for the borrower. Bridging loans can be used for acquisitions, refinancing and buy-outs. They key is to find the right loan provider and ensure the take-out of the loan. These loans can be provided by high net worth individuals or institutions.