What is Bridge Finance?
Let's say your company has taken up a big project and it has approached financial institution for a long term loan and let's say that loan also has been sanctioned but Financial institution is taking time for finalising its procedures related to security creation Or tie up with other institutions. Here loans are approved in principle or say sanctioned but what has come in between is the processing time but lets say your company cannot afford to lose further time in starting the project at this juncture Bridge finance will help your company.
What is bridge finance? it is a loan taken by Business units usually from commercial bank for a shorter period and these loans are normally taken when term loans are sanctioned but pending disbursement. Here we will have a question as to how this loan will be repaid? Understand this is a temporary loan and generally it will be repaid out of the proceeds of the principal term loan sanctioned by financial institution. These loans will be secured generally by hypothecation of movable assets, personal guarantees and demand promissory notes and if you look at the interest rate it will be slightly higher when compared with normal term loans.