Wall Street Words word of the day = Bridge Loan
Hello YouTube, Todd Ault here, and Welcome to Wall Street Words! Today's Wall Street term is "Bridge Loan"
"Bridge Loan", a term commonly used in M&A and all kinds of transactions. It's a short-term loan by, usually, an institution or high net-worth individual to "bridge" to a transaction, hence, Bridge Loan. I'll give you a real world example of a Bridge Loan, and that is Facebook, I believe, got a $14 billion bridge loan from a consortium of banks. And when it went public on its IPO, those proceeds were used to paid back the Bridge Loan. Bridge Loans are commonly used in M&A transactions where a company needs to borrow money short-term, usually in less than a year. The company using the Bridge Loan puts up assets, some collateral, buildings, real estate, etc. to borrow that money short-term, under a year, as I said earlier and then, an event of future financing, usually pays off that Bridge Loan. Now, as a side note, I've got tons of Bridge Loan to transactions. In fact, I'm presently providing a Bridge Loan to a company. It's going to go public. Now, I expect to get paid the proceeds back about 180 days after the IPO, somewhere around that timeframe. Today's word is "Bridge Loan."
Definition - A bridge loan is a short-term loan used until a person or company secures permanent financing or removes an existing obligation. It allows the user to meet current obligations by providing immediate cash flow. Bridge loans are short term, up to one year, have relatively high interest rates, and are usually backed by some form of collateral, such as real estate or inventory. These types of loans are also called bridge financing or a bridging loan. Often the proceeds of a subsequent financing funds the payment of the bridge loan.
Also known as interim financing, gap financing, or swing loans, bridge loans bridge the gap during times when financing is needed but not yet available. Both corporations and individuals use bridge loans and lenders can customize these loans for many different situations. When Olayan America Corporation wanted to purchase the Sony Building in 2016, it took out a bridge loan from ING Capital. The short-term loan was approved very quickly, allowing Olayan to seal the deal on the Sony Building with dispatch. The loan helped to cover part of the cost of purchasing the building until Olayan America secured more-permanent, long-term funding.
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