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Another type of bridge loan would be a construction loan. These loans finance construction whether a remodeling of the existing building, an addition, an expansion or to fund the construction of a new building. As this stage of a project, the collateral is normally not sufficient to secure conventional financing, so the construction loan is used as the short-term solution until the construction has been completed. Once the construction is completed, more permanent financing is put in place to retire the construction loan. It most instances, the construction lender will require that the permanent financing (the take-out loan) to be tentatively in place before the construction loan can be used.
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