{"id":37836,"date":"2023-10-13T09:23:03","date_gmt":"2023-10-13T09:23:03","guid":{"rendered":"https:\/\/swoopfunding.com\/za\/?post_type=business-glossary&p=37836"},"modified":"2025-04-24T14:48:26","modified_gmt":"2025-04-24T14:48:26","slug":"bridge-loan","status":"publish","type":"business-glossary","link":"https:\/\/swoopfunding.com\/za\/business-glossary\/bridge-loan\/","title":{"rendered":"Bridge loan"},"content":{"rendered":"

Definition<\/h3>\n

A bridge loan<\/a>, also known as interim financing or a swing loan, is a short-term loan<\/a> used to provide temporary financial assistance until a more permanent source of funding becomes available. <\/span><\/p>\n

What is a bridge loan?<\/h3>\n

Usually, a bridge loan ranges from a few weeks to a few years, but is not intended for long-term financing. It’s typically used in real estate transactions and business scenarios where there’s a need for immediate cash flow<\/a> to bridge a gap between two major financial events.<\/span><\/p>\n

Purpose of bridge loans:<\/span><\/p>\n

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  1. Real estate<\/b>: In real estate, bridge loans are used to finance the purchase of a new property before the sale of an existing one.\u00a0<\/span><\/li>\n
  2. Business<\/b>: In business, bridge loans can be used to cover operational expenses, fund working capital needs, or facilitate the acquisition of assets<\/a>.<\/span><\/li>\n<\/ol>\n

    Like many loans, bridge loans often require collateral. In real estate, the property being purchased and sometimes the property being sold serve as collateral<\/a>.<\/span><\/p>\n

    Bridge loans typically come with higher interest rates<\/a> compared to traditional loans. This is because they are considered riskier due to the short-term nature and potential uncertainties regarding the timing of repayment.<\/span><\/p>\n

    While bridge loans can provide crucial short-term funding, there is risk involved, particularly if the expected events (such as property sale or contract fulfilment) do not materialise as planned.<\/span><\/p>\n

    Example of bridge loan<\/h3>\n

    A real estate developer, XYZ Properties, is planning to build a residential complex.<\/p>\n

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    1. Bridge loan application:<\/strong>\n