What is a business bridging loan?
A bridging loan (bridge loan) is short-term financing that bridges the gap between two events. Think of the period between signing an acquisition agreement and securing the final financing, or between buying and selling commercial property.
Typical situations
- Acquisition: you need to complete quickly, with long-term financing following later
- Property: you buy new premises before the old premises are sold
- Grant or investment round: the funds have been committed but not yet transferred
- Seasonal peak: you need to buy stock for the peak season
Features
| Feature | Typical terms |
|---|---|
| Term | 3 to 24 months |
| Interest | 8% to 15% per year |
| Repayment | Bullet payment, in full at maturity |
| Security | Mortgage, pledge or surety guarantee |
| Processing time | 1 to 4 weeks |
The exit is what matters most
A bridging loan depends on a credible exit: how will you repay it? Lenders want to see this in writing. A signed sale agreement, a term sheet from the bank or a binding commitment from an investor can make the difference between a cheap and an expensive bridge — or between securing financing and not securing it.
Pitfalls
- Extension costs: if the exit is delayed, you often pay a substantial extension fee
- Hidden costs: arrangement fees, valuations, civil-law notary fees and exit fees quickly add up
- Temporarily covering structural problems: a bridge does not fix a loss-making business model
- Personal guarantee: read exactly what you will be personally liable for
Alternatives
Before taking out an expensive bridge, consider whether an increased overdraft limit, factoring or extended supplier payment terms could close the gap. These are often cheaper for short-term shortfalls.
Conclusion
A bridging loan is a useful tool when the destination is clear and the opportunity outweighs the costs. Always build a buffer into the term: exits almost always take longer than expected.
Sources and scope
Examples and policy choices in this article are illustrative, not a current quotation, fixed standard or financial or legal advice. The editorial revision date relates to the summary, structure and source references; it is not a reference date for the underlying data.
| Primary source | What is it used for? |
|---|---|
| KVK (Dutch Chamber of Commerce) — checking business partners | Company identification and checks on business partners. |
Source links support the topic mentioned, but do not automatically substantiate all percentages, time frames or examples in this article. Check current terms and rules with the responsible authority.
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