Bridging Loans

If you are trying to convert an apartment complex into condos and a bank will provide you with a sum of money only after a five month period, you might take out a bridge loan to finance your project while you are waiting for the bank.

Bridge loans may also be funded with hard money loans. Bridge loans are also commonly used by consumers for the purchase of real estate. In corporate finance, bridge loans are often used by companies to avoid running out of fund between larger securities offerings.

A consumer is purchasing a new residence and plans to make a down payment with the proceeds from the sale of a currently owned home. The currently owned home will not close until after the close of the new residence. A bridge loan allows the buyer to take equity out of the current home and use it as down payment on the new residence, with the expectation that the current home will close within a short time frame and the bridge loan will be repaid.