Which type of loan is designed to replace short-term financing like a construction loan?

A take-out loan is specifically designed to provide long-term financing that replaces short-term loans, such as construction loans. Construction loans are usually short-term, providing funds to cover the costs of building a property before it can be sold or refinanced. Once the property is completed and generates income or is ready for sale, a take-out loan steps in to replace the construction loan, allowing the borrower to transition to a more stable, long-term financing option.

This type of loan typically involves a lender providing funds that can be used to pay off the construction financing, facilitating smoother cash flow management for the borrower and ensuring the property is financed at more favorable long-term rates. Other options, while related to financing, do not primarily serve this specific purpose of replacing short-term loans with long-term financing.