CA Inter P6 · Chapter 2 · Question 7 of 7
A company has obtained sanction of a term loan from a financial institution, but disbursement will take three months. In the meantime it takes a short-term loan from a bank to start work on the project, to be repaid from the term loan proceeds. This short-term loan is known as:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Bridge finance
Explanation
Bridge finance is a short-term loan taken to meet expenses while formalities for a sanctioned long-term loan are completed. It is repaid when the term loan is disbursed. Packing credit is pre-shipment finance for exporters, and deferred credit refers to buying assets on instalment terms.
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