Bridge Loans are precisely what they sound like, a bridge from the here and now to a point in the future used to span a gap. There isn’t a particular type of bridge loan. Instead, the focus is on the specific need to use a bridge loan. Bridge Loans can be used to shore up cash flow from now until the start of the busy season; they can be used to get access to capital now while waiting on a more permanent financing option to be put into place or just while waiting for one of your big clients to make a payment.
No matter what the specific need for a bridge loan is, the main idea is that it is a temporary fix to solve an issue. Bridge loans, just like bridges on the highway are best used when there is an on and off ramp or a starting point and an exit. If there isn’t an exit, a bridge loan becomes a regular loan and should be thought about as something that can impact the business one way or another over a more extended period.
True bridge loans are short-term fixes and with the proper exit strategy can be very handy and barely noticeable by the business.