A Short term loan or bridging loan is normally arranged for someone who will return the loan in short term (usually below 12 months). This could be an interest free loan or convertible type, however any terms of convertible will be discussed in the next article.
The Short term loans normally covers the followings: amount of loan, interest rate, and payment methods. Short term loan may be considered as a quick solution for company who is not yet ready to issue shares temporarily due to licensing or any other type of prohibition and restriction. Next Article will be discussing about TAX TREATMENT TO SHORT TERM LOAN.
Any investor wanting to invest but due to certain matters, the due diligence or audit has not been concluded and the company requires money- thus the short term loan or bridging loan is created.
Other reasoning to do this is because due to some certain matters the fund is needed however the law has additional requirements for the license to be issued.
A Short term convertible note is also found in the arrangement where the loan directly converted to shares within a short term period after certain prerequisite.