Search

What Is a Bridge Loan and How Does It Work



What Is a Bridge Loan?

A bridge loan is a short-term loan used until a person or company secures permanent financing or pays an existing obligation. It allows the borrower to meet current obligations by providing immediate cash flow. Bridge loans have relatively high interest rates and are usually backed by some form of collateral, such as real estate or the inventory of a business.


These types of loans are often used in real estate and are also called bridge financing or a bridging loan.


 
KEY TAKEAWAYS

  • A bridge loan is short-term financing used until a person or company secures permanent financing or removes an existing obligation.

  • Bridge loans are often used in real estate, but many types of businesses use them as well.

  • Homeowners can use bridge loans toward the purchase of a new home while they wait for their current home to sell.


 



How a Bridge Loan Works

Als