What Is A Bridge Loan?
A bridge loan is a short term (usually a few weeks) loan taken out pending the securement of long(er) term financing.
Bridge Loans In Real Estate
In real estate transactions (mostly commercial real estate transactions), it is not uncommon for banks to provide bridge loans to cover certain costs to speed up closing. For example, commercial properties in foreclosure may be retrieved via bridge loan to hasten a transaction.
Bridge Loans In Venture Capital
In the field of venture capital, bridge loans are commonly sought to carry temporarily struggling companies to the next (ideally more profitable) stage. For instance, a bridge loan may be appropriate to cover a start up company’s operating expenses pending an imminent acquisition.
Bridge Loans As An Investment Vehicle
They say that money makes the world go ’round, so it should come as no surprise that providers of bridge loans are not in business out of the goodness of their heart. Bridge loans typically have a very high interest rate. This is reflective of their risk.
Understanding The Other Side
In chess, one of the best strategies to improve your game is to play against yourself. The theory behind this is that it enables players to view their own moves through the eyes of their opponents, forcing more honest assessment. It is similarly important for entrepreneurs to understand the investment side of venture capital (and vice versa); doing so improves your game.
Got A Bridge Loan Question?
Attorney Chris Mutchler may be able to help. Get in touch with The Law Office of Christopher J. Mutchler. If we can’t help you, we’re more than happy point you in the direction of someone who can! (…seriously, it makes us look good!)
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