Bridging loan

Definition

A bridging loan is a short-term facility designed to bridge the gap between an immediate need for funds and a future event that will repay it — typically the sale of an asset, completion of a deal, or the arrival of longer-term finance. It is fast to arrange and short in duration, usually measured in weeks or a few months rather than years.

In plain terms

Sometimes the money you are owed, or expect, lands later than the money you need to spend. A bridge covers that interval. A common business case is property: a company buys new premises before selling its old ones, and the bridge funds the purchase until the sale completes and repays it. The defining feature is the exit — the identified, credible event that clears the loan. Without a solid exit, a bridge is a trap; with one, it is a precise tool.

Why it matters to your business

Speed and timing are the point. A bridge lets you act on an opportunity — buy stock at a discount, secure premises, complete an acquisition — without waiting for slower funding to come through. Because it is short-term and often secured, it is usually arranged quickly. The cost per month tends to be higher than long-term debt, so a bridge is built for sprints, not marathons. For ongoing needs, a revolving facility or term loan is the better fit; for a defined, time-boxed gap, the bridge earns its keep.

• Fast to arrange when timing is tight
• Built for a defined, short gap
• Needs a clear, credible exit

Open versus closed bridges

A closed bridge has a fixed, certain repayment date — for example, a property sale that has already exchanged contracts. An open bridge has an expected but not yet confirmed exit, such as a sale still being marketed. Closed bridges carry less risk and usually price more keenly; open bridges demand a robust fallback plan in case the exit slips. Whichever you take, stress-test the exit: ask what happens if it arrives a month late, and make sure the answer is survivable.