A petroleum exploration company takes a short-term bank loan in order to finance the purchase of several truck-mounted, vibroseis shakers, which have unexpectedly come onto the market at a good price. Once the purchase is made, the company will obtain long-term financing. Which of the following best describes the short-term loan the company has taken?

Question

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A bridge loan is a short-term loan taken out by a company to bridge the gap between the immediate need for financing and the long-term financing that will become available in the near future. This type of loan is commonly used in situations like the one described in the scenario, where a company needs quick financing to take advantage of a time-sensitive opportunity.

A Petroleum Exploration Company Takes a Short-Term Bank Loan in Order