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      Question

      In corporate finance, a Bridge Loan is best described as

      which of the following?
      A A short-term loan used to cover immediate cash needs until long-term funding is secured Correct Answer Incorrect Answer
      B A loan provided specifically for infrastructure projects Correct Answer Incorrect Answer
      C A microfinance loan given to small borrowers Correct Answer Incorrect Answer
      D A type of loan automatically converted into equity Correct Answer Incorrect Answer
      E None of the above Correct Answer Incorrect Answer

      Solution

      • A Bridge Loan (also known as gap financing or swing loan) is a short-term loan provided to borrowers to meet urgent liquidity requirements until they secure more permanent or long-term financing. • These loans are usually expensive due to their short tenure and higher risk, with interest rates much higher than conventional loans. • They are particularly common in the real estate and construction industry, where funds are needed quickly to start or continue projects until larger, long-term financing is finalized. • Typical tenure: up to 12 months. Thus, a Bridge Loan is essentially gap financing that “bridges” immediate funding needs with future long-term capital inflows.

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