Accounting Dictionary

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Bridge Loan

Definition: A bridge loan is a form of short-term debt that covers the time period between the conclusion of a prior loan and the commencement of another loan. Thus, the recipient is committing to obtain longer-term financing shortly that will pay off the bridge loan.

This option is commonly used when an entity is seeking to replace a construction loan with a long-term note that it expects to pay down gradually over a number of years. A bridge loan is typically secured by facilities or fixtures in order to obtain a lower interest rate.