What type of loan is characterized as a short-term financing option until permanent funding can be secured?

A bridge loan is designed specifically as a short-term financing option that provides immediate funds before securing permanent financing. This type of loan is commonly used in real estate transactions to bridge the gap between the purchase of a new property and the sale of an existing one, or to cover costs during the development process until long-term financing is arranged.

Bridge loans are usually structured with a term of 6 months to 3 years and feature high interest rates due to their short-term nature. They allow borrowers to act quickly in competitive real estate markets where timing is crucial. The financing provided by a bridge loan enables buyers to seize opportunities while they wait for more permanent financing sources, such as traditional mortgages or commercial real estate loans, to become available.

In the context of the other options, a gap loan might provide funding for specific short-term needs, but it is not as commonly referenced as a bridge loan. A term loan typically refers to a long-term loan with set repayment periods, while a construction loan finances the cost of building a property until it can be converted to a permanent mortgage. Thus, while all these loan types serve specific purposes in financing, the bridge loan is the one that distinctly serves as short-term financing until longer-term funding can be secured.