Definition: Bridge loan is a type of gap financing arrangement wherein the borrower can get access to short-term loans for meeting short-term liquidity requirements.
Description: Bridge loans help in bridging the gap between short-term cash requirements and long-term loans. These loans are normally extended for a period of 12 months. These loans are provided at exorbitant rate of interest and are normally backed by an asset collateral like equity, debentures etc.
The same may require cross-collateralization herein the collateral used in one loan can be used as collateral for a different loan. Here the loan to asset value ratio can be low depending on the risk propensity of the lender.