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Simple English definitions for legal terms
interim financing
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A quick definition of interim financing:
Interim financing is a short-term loan that helps cover big expenses, like building costs, until a permanent loan can be obtained. It's like borrowing money from a friend until you can pay them back with a bigger loan from the bank. Other types of financing include debt financing, which is borrowing money by issuing bonds or notes, and equity financing, which is raising money by selling shares in a business. Project financing is a type of funding used for big, expensive projects like power plants or mines, where the lender looks primarily to the money generated by the project as security for the loan.
A more thorough explanation:
Interim financing is a short-term loan that is secured to cover certain major expenditures, such as construction costs, until permanent financing is obtained. It is also known as construction financing.
- A construction company takes out an interim financing loan to cover the costs of building a new office building. Once the building is complete, they will obtain permanent financing to pay off the interim loan.
- A business needs to purchase new equipment but does not have the funds to do so. They take out an interim financing loan to cover the cost of the equipment until they can obtain permanent financing.
These examples illustrate how interim financing is used to cover short-term expenses until permanent financing can be obtained. It is a useful tool for businesses and individuals who need to make large purchases or investments but do not have the funds available at the time.