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Bridge Loans

Bridge loans are taken to bridge a short break between periods when financing is needed and when large and permanent inflow is anticipated. Generally the loan is given after the bank is satisfied that arrangements have been made to raise funds or resources. Bridge loans are taken by firms to meet working capital requirements in the interim period of receiving proceeds from an equity issue, ECB, NCD, FDI or some other source. Only large banks provide such loans. They are also known as swing loans, caveat loan, interim financing or gap financing elsewhere.

Bridge loan can also be used by individuals in the interim period of selling and buying a property. Few banks like SBI, Citibank and some HFCs offer bridge loans for property. Interest rate on bridge loans is higher than on usual home loans since they are short term loans (tenure up to 1 year) and due to additional costs involved.

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