What Is A Bridge Loan?

A physical bridge representing a bridge loan

You have probably heard the term but do you know what it really means?

A bridge loan is a short term loan that allows you to cover purchases, payroll, inventory, expenses or other costs while you wait for longer term financing or revenue.

For example, you are buying a new dump truck for your construction business. You need it to begin work on a large contract you have already secured and the client needs you to begin work very soon.

You have the truck ordered and it is awaiting your initial payment so you can begin using it. But, you do not have enough money in the bank to make the payment.

You will be receiving a large deposit from the client the day you break ground on their project and you can use that money to make your initial payment on the truck. Additionally, you have an application in for a 5 year commercial loan to pay the full cost of the truck but that is still being processed.

Vicious circle right?

A short term Bridge Loan can be the perfect solution. You receive a loan that has to be paid back in full but you can use it to get the project started and then use the client’s deposit for the payment if your commercial loan is not yet finalized.

Problem solved and you can get to work!

If a Bridge Loan is not the right option for your equipment needs, we have other options you can read about here!

What Is A Bridge Loan?