Bridges are built so that people can overcome obstacles and get where they want to go. In the world of real estate or business, bridge financing is no different.
Often used by companies to keep up with cash flow needs while waiting for long-term financing, a so-called bridging loan is used to avoid a cash crunch. For individual consumers and families, bridge financing tends to be reserved for situations involving the purchase or sale of a home. For example, if you own a home and are selling it to buy a new one, but close the deal on the new home before you’ve finalized the sale on the last one, then a bridge loan can help you cover your costs in the interim.
This short guide will explain how a bridge loan works, the advantages and drawbacks of this form of short-term financing, as well as some tips to secure bridge financing, should the need arise.