Is a gap loan and bridge loan the same?

1 Reply

@Joseph Pagan

A bridge loan is a senior loan or 1st position loan. A gap loan is similar to mezzanine capital and covers the gap between the debt and the equity (it is a hybrid layer of capital). For example; you purchase a property and need $10mm (for the property and repairs). You receive a bridge loan for $7mm, but you only have $2mm in cash to put down. You acquire mezzanine capital or a gap loan for the last $1mm of the capital stack. This type of capital is much more expensive because it is subordinated to the repayment of the senior loan (it is second position) BUT it ranks above repayments to equity holders (you).