What is bridge finance?
Bridge financing is a type of gap financing in which the borrower can get access to short term credit to meet short term liquidity requirements.
Bridging loans help bridge the gap between short-term cash needs and long-term loans. These loans are usually renewed for a period of 12 months. These loans are granted at exorbitant interest rates and are usually backed by collateral such as equity, debt securities, etc.
This may require mutual collateralization as the security used on one loan can be used as collateral on another loan. Here, the loan-to-value ratio can be low, depending on the lender's risk appetite.