A bridge loan is a short-term loan that is typically used to provide temporary financing for an individual or business until more permanent financing is obtained. The purpose of a bridge loan is to “bridge” the gap between the time when funds are needed and the time when more permanent financing becomes available.
Bridge loans are often used in real estate transactions, such as when a homebuyer needs to purchase a new home before selling their current home. The bridge loan can provide funds to purchase the new home, with the expectation that the loan will be repaid when the current home is sold.
Bridge loans can also be used by businesses to cover short-term cash flow needs, such as paying for inventory or payroll, while waiting for long-term financing to be secured.
Overall, the purpose of a bridge loan is to provide a temporary source of funding to meet immediate financial needs until more permanent financing can be obtained.