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What is a Bridge Loan?
Many business owners utilize bridge loans, especially in situations where working capital is limited. It is important for businesses to keep a financial plan that capitalizes on many different sources of funding in order to keep a business afloat. There are countless scenarios and reasons for a business to use bridge financing. Some of those scenarios include time spent waiting for clients or customers to fill existing invoices or when purchasing new equipment. There are countless scenarios and reasons for cash flow to run dry. Many business owners find themselves in a position where they need capital fast and traditional loan options are not quick enough to be the solution. This need for a fast transaction is where bridge loans can be the answer for many businesses. The biggest benefit of bridge loans for businesses is that bridge lending allows small business owners to receive and use money quickly, with different options available to pay the funds back later.
What can a bridge loan be used for?
Taking advantage of equipment or inventory discounts
Gap financing while permanent financing is being worked on
Business growth and expansion
Hiring new employees
These are just some of the many uses that business owners commonly use to bridge loans for. Generally, when a business owner applies for a business bridge loan, there are several other financing lines being used in association with the bridge loan financing. For example, because the application and qualification process is often quicker for a bridge loan than for other traditional loan options, some business owners apply for and receive funds from bridge loans while awaiting funds from other loan products. When businesses are expecting additional, permanent financing but require immediate cash flow assistance, a bridge loan can provide a viable solution.
What are the benefits of a bridge loan?
Business bridge loans provide flexibility for business owners. Some of the benefits of bridge loans for business owners are: bridge loans provide available capital at your fingertips; the application process is quick and easy; there are no application or upfront fees; there is limited documentation required; most lenders can finish underwriting and close your bridge loan within 24-48 hours; most lenders offer flexible repayment terms.
Available capital at your fingertips
Quick and easy application process
No application or upfront fees
Limited documentation required
Underwriting and closing within 24-48 hours
Flexible repayment terms
What are the best industries for Bridge Loans?
Regardless of the industry that a business works in, it is important to consider cash flow before applying for a bridge loan. Bridge loans are intended to be short in duration, as they are just bridging a gap. For business owners considering a bridge loan for their working capital needs, the most important thing to consider is to make sure that their cash flow can support the payments for the terms throughout the duration of the bridge loan – if a business ends up in a situation where they can’t make their payments, it will hurt their credit and could ruin the business. Business owners should make sure to find a lender that they can discuss their financial situation extensively to help determine if bridge lending is right for their business.
How does the Bridge Loan process work?
One thing to note about bridge loans is that because there are shorter terms, and the urgency to get the funds is higher than with other loan options, the interest rates tend to be higher than with other funding options. A smart small business owner will do some research about multiple funding options to create a financing plan that works optimally for their situation. Bridge loans are one option to help fill gaps by taking advantage of a quicker underwriting process for short-term loans that can help immediate cash flow needs.