What is Bridge Loan?
The Short Answer
Bridge Loan explained simply
A bridge loan is like a temporary financial solution. It helps you cover costs quickly when you need money fast, but you know a bigger, more permanent loan is coming. Think of it as a short-term fix to get you from point A to point B without interruption.
Real-World Example
The Expanding Bakery
A bakery wants to buy a new, larger oven that costs $50,000. They have applied for a traditional bank loan, but it will take 60 days to process. A bridge loan of $50,000 allows them to buy the oven now and start increasing production. Once the bank loan comes through, they use it to pay off the bridge loan.
Why this matters
Bridge loans are important because they help businesses act fast. They let you take advantage of opportunities or cover urgent needs without waiting for slower, traditional financing. This can keep your business moving forward without delays.
Bridge loans are great for speed, but they often come with higher interest rates. Make sure you have a clear plan for paying it back with your long-term financing.
Bridge loans are great for speed, but they often come with higher interest rates. Make sure you have a clear plan for paying it back with your long-term financing.
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