Bridge Loans

Although short-term bridge commercial loans are sometimes used to finance the same type of operating costs as a working capital line of credit, they differ from lines of credit in that a commercial loan is usually taken out for a specific expenditure ( e.g., to acquire a business, to purchase a specific piece of equipment or pay a particular debt), and a fixed amount of money is borrowed for a set time with interest or fee paid on the lump sum.  For nearly all startup businesses, and most existing businesses, a short-term bridge commercial loan from a bank will have to be secured by adequate collateral. Cash flow and a regular sales history are of key importance to the lender. A fixed interest rate may be available because the duration of the loan, and therefore the risk of rising rates, is limited. While bridge loans have terms as brief as 90-120 days, the loans may extend six months to one year for certain purposes. These loans may be secured by accounts receivable or inventory, as well as fixed assets.