In real estate finance, Gap Financing refers to short term loans used as interim financing until permanent or long term financing is secured. These loans are typically used to bridge a temporary funding gap during construction, development, or the transition between loan arrangements.
Gap financing is usually secured by the property and may carry higher interest rates due to its short term nature and increased risk. Once permanent financing is obtained, the gap loan is paid off, allowing the project or transaction to move forward without delay.
