Definition of Gap Financing
In mortgage loans and property loans, the finance term Gap financing is applied; this is one of the forms of finance loan that covers a gap in time, funding, or negotiations. It is a bridge loan which is called any in others words, is motivated to finance the difference between the floor loan and the maximum permanent loan as committed.
- The representatives are there to assist the customers, who are in need of gap financing, can discuss their requisites and then come with the conclusions that they can manage to provide suitable loans. When bank goes on gap financing, they want to make sure that the loan is truly on short term basis with the low risk of default.
- Gap financing is the form of loan that runs against the distribution rights, that production company has not sold yet, after trading those off the lender is the first creditor to get the money along with the interest and fees.
Books on Gap Financing
The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money By Carl Richards (published by Penguin, 2012)
Bridging the Entrepreneurial Financing Gap: Linking Governance with Regulatory Policy By Michael J. Whincop (published by Ashgate/Dartmouth, 2001)
How Gap Financing works?
To know the notions of Gap financing, here are two of examples that give a clear of that finance terms consists in it.
- Home loan is one of the areas of Gap financing, in home loans the gap financing appears between the total amount of loan and the amount that the bank is willing to pay, in that case the borrower can take a specialized to make a down payment, in addition to the conventional home loan.
- Property development can involve gap financing, and property development can be very expensive, the gap between the projected sales price and the development cost, gab financing can help to reach the gap in order to complete the project.
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