Define Bridge Loan

Determine interim financing

Bridging loans are of two types: Known as bridge financing. Temporary loan or financing with a term of less than one year that is used until an entity is able to secure long-term financing from a lender or an investor. This is where the idea of the "bridge" comes in - financing to take you from one step to the next.

This is the discrepancy between concluded interim financing and open interim financing.

How much is a bridge loan? As a rule, lendings are made for a period of one year or less. In contrast to long-term mortgages, a bridge loan is not repaid in the form of montly installments, but as a flat-rate amount. Bridge credits can sometimes be organized in one or two day, although two week is a more typically length of time.

An interim loan can also be used to renovate or repair a saleable home. Loan bridge is one in which the creditor knows how you will repay the loan and when you can do so. It is referred to as the "exit strategy".

Alternatively, you may have other options for repaying the loan. Open bridge loans are available if you don't have a clear exit policy, although of course you have to reimburse the loan when it is due, so you need to know how you will be able to do it.

However, since creditors consider open bridge credits to be riskier, they usually have a higher interest rates than secured credits, and the creditor must be pleased that you will be able to repay the loan. Normally you are expecting to repay the loan within six or twelve month, whichever is the earlier, otherwise you will be fined.

Shopkeepers often use bridge credits to fund the growth of their businesses. A few have seasons selling and need a bridge loan to buy stocks and fulfill their pay slips. You may need a bridge loan in the sommer to keep the store running until the Christmas sells come in. Typically, a company will have to move to a new location in order to obtain a loan.

However, if the company does not yet have a purchaser for its current facilities, open credit is more appropriate. If the loan is an open or locked bridge loan, a company or an individuals must have a clear vision of how and when they can pay it back.

There are no other bridge credits, however. Find the best bridge loan to suit your needs and we'll make you an offer in a matter of just a few moments.

Auch interessant

Mehr zum Thema