How is an escrow or gap closing different from ordinary bridge financing between two closings?
A gap or escrow closing addresses a timing problem within one deal, letting the practical closing happen while formal registration or another loose end is completed shortly afterward, usually within days, under a lawyer's undertaking. Bridge financing addresses a completely different problem: a short-term funding gap between two separate transactions, most often where a buyer's purchase must close before the proceeds from their own sale are actually received.
In other words, a gap closing is about sequencing the steps within a single transaction, while bridge financing is about covering money you are counting on from one deal to complete another. The two can overlap in the same overall situation, such as a buyer using bridge financing to complete a purchase while their own sale is itself proceeding as a gap closing, but they solve different problems and involve different arrangements, one a legal undertaking between lawyers and the other a short-term loan from a lender. Understanding which problem you actually have helps you and your lawyer identify the right tool rather than treating the two as interchangeable.
Key takeaways
- A gap or escrow closing sequences the steps within one transaction using a lawyer's undertaking.
- Bridge financing covers a funding gap between two separate, related transactions.
- The two solve different problems and can be used together in the same overall situation.
- Knowing which problem you have helps your lawyer and lender apply the right solution.