Gap Financing

This article talks about Gap Financing, which is a financial assistance in the form of a loan to cover a gap in time, funding, or negotiations. It is an interim loan given to finance the difference between the floor loan and the maximum permanent loan as committed. Gap financing is a loan made against the distribution rights that the production company has yet to sell. It is subordinated temporary financing paid off when the first mortgagee disburses the full amount due under the first mortgage loan. It can also be used in purchase/rehab lending to fill the “gap” between the borrower’s down payment, and the amount lent by the 1st lien holder, or rehab lender.