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Bridge loan

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Bridge loan
A kind of Short-term financing that allows a company to continue running until it can arrange longer-term financing.
    
A Short-term loan that is used until a person or company can secure permanent financing. Companies sometimes seek this because they run out of Cash before they receive Long-term funding; sometimes they do so to strengthen their Balance Sheet in the run up to flotation. As the term implies, these loans "bridge the gap" between times when financing is needed. They are used by both corporations and individuals and can be customized for many different situations. For example, let's say that a company is doing a round of Equity financing that is expecting to close in six months. A bridge loan could be used to secure Working capital until the round of funding goes through. In the case of an individual, bridge loans are common in the Real Estate market. As there can often be a time lag between the sale of one property and the purchase of another, a bridge loan allows a homeowner more flexibility.
Posted by  Marcus Evans (ANZ) Limited
 
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