Bridge Loans

Bridge Loans

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    What is a Bridge Loan?

    A bridge loan is a short-term loan, usually lasting a year or less, designed to solve short-term cash flow problems. Business owners usually utilize bridge loans to address immediate financing needs such as bridging cash flow gaps, acquiring real estate, or taking advantage of time-sensitive business opportunities. These unexpected circumstances often require additional funding and business owners need to find multiple ways to bring in working capital to help with cash shortages. Instead of taking out a personal loan, or other types of business loans (e.g., line of credit, equipment loan, etc.), bridge loans provide an alternative solution, as they offer quick cash with flexible repayment options.

    Many business owners use bridge loans to temporarily inject additional capital into their business while they secure a more permanent financing solution. Businesses need to keep a financial plan that capitalizes on many different funding sources to keep their business afloat.

    There are countless scenarios and reasons for a company to use bridge financing. Some of those scenarios include waiting for clients or customers to fill existing invoices or purchasing new equipment.

    There are countless scenarios and reasons for a business’ cash reserves to run dry. It could be unpaid customer invoices or the business recently made a big equipment purchase. During these times, business owners may find themselves in a position where they may need capital fast, and traditional loan options are not quick enough to be the solution. This is then where bridge loans come in handy.

    One of the biggest benefits of bridge lending to small businesses is it allows business owners to receive and use money quickly, and pay it back either in monthly installments or in a lump sum.

    Short-term Bridge loans (also known as swing loans) are commonly utilized in transactions involving real estate, and usually last six months to a year on average. Swing loans can be used to fund the purchase of a new commercial real estate before selling your current one.

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    Loan Amounts

    $25,000 – $5,000,000

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    Rates

    Starting at 12%

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    Speed

    24 - 48 Hours

    What can a bridge loan be used for?

    Bridge loans are designed to help business owners fill in gaps in their cash flow. Often, a business will utilize a bridge loan while they secure a more permanent financing solution. A bridge loan can also be useful if an opportunity or urgent situation comes up where additional funds are needed immediately and there is no time to wait for revenue to catch up to expense needs. The flexible requirements for bridge loans allow businesses to utilize bridge lending for many different functions. The most common uses for the financing are outlined below:

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    What are the benefits of a bridge loan?

    Because they are designed to help business owners with immediate, short-term cash flow needs, bridge loans are an excellent option for business owners to consider, and they offer many benefits. Rather than using a personal loan or savings, or being forced to pass on profitable opportunities, business owners can apply for a bridge loan.

    Once approved, the funds can often be wired within 24 hours after approval. One benefit of bridge lending for business owners is that lenders usually do not need much information during the application and qualification process compared to traditional lending options with longer terms and their interest rates are usually competitive. Additionally, businesses do not need to demonstrate as high credit score to qualify compared to other loan products.

    Small business bridge loans provide flexibility for business owners. Some of the benefits of bridge lending for business owners include making capital readily available; quick and easy application process; no application or upfront fees; flexible payment terms; affordable interest rates and; limited documentation requirements. Most lenders can finish underwriting and close your bridge loan within 24-48 hours.

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    What are the best industries for Bridge Loans?

    Bridge lending solutions are great solutions for industries that need quick access to cash. Bridge loans allow business owners to utilize cash immediately, often when there is future funding on the way, and many different types of businesses apply for these types of loans. From construction companies, medical offices, manufacturers, or transportation companies, business bridge loans are a popular financing solution for many business owners because they all have one thing in common – they often find themselves in situations where they need cash fast.

    Regardless of the industry that a business works in, it is important to consider cash flow or other financing options, such as a business line of credit, before applying for a bridge loan. Bridge loans are intended to be short in duration, as they are just for bridging gaps.

    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 they can discuss their financial situation extensively to help determine if bridge lending is right for their business.

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    How does the Bridge Loan process work?

    One of the first things business owners need to ask when researching bridge loans is how it works. Luckily, with the amount of information available on the internet, it is easy to find out what type of bridge loan options are available and how to find business bridge loan lenders that are right for any business. Some online resources even provide a bridge loan calculator and other tools for business owners to learn about bridge loans.

    A bridge loan is not very different from most traditional loan options; other than that, the bridge loan terms are usually shorter. Bridge loans are designed to help business owners bridge gaps in working capital for short periods – usually to fill in cash to take advantage of growth opportunities or help in cash flow shortage situations, especially for seasonal businesses. Some lenders will require collateral or down payment to secure the funds for a bridge loan, and other lenders will take liens on other assets that the borrowing business can put up to secure the funds. It is essential for business owners to find a lender that they can work with to negotiate terms that work best for their business.

    Because bridge loans are based on cash flow, and the bridge loan terms are shorter than with other lending options, the qualification and application process is not as long and tedious as with some of the different lending products available for business owners. The process to secure a bridge loan is more straightforward than other types of financing. Lenders will need to look at some bank statements and check the business owner’s credit to know if the business will pay back the borrowed funds. Additionally, a business’ credit doesn’t need to be as good as the high credit score required to qualify for other types of lending – the lender will need evidence that the borrowing business will still be around and able to pay back funds for the terms of the loan. Additionally, a down payment may be required, especially if the business’ credentials aren’t that good.

    Typically, with a paperless, one-page application and limited documentation necessary, funds could be available as quick as 24 hours. Once the loan is secured, payments will be made daily, weekly, or monthly, depending on the lender, until the loan is paid off in full.

    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. An innovative small business owner will research 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 financing needs.

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    Bridge Lending Solutions

    Bridge Lending Solutions is an online installment loan firm specializing in consumer loans. Unlike many other lenders, they provide customers with numerous payment alternatives to better manage their money. They provide prompt and secure service with no middlemen and fast, pleasant U.S.-based personnel as a direct lender. They cherish their clients and recognize that consumer loyalty must be earned.

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    Bridge Loan Case Study

    One of our clients own a dental practice, and the company recently expanded into the office next door. The landlord was paying for a small percentage of the buildout, but there was a need for down payment and additional capital for both dental equipment and working capital for our client to hire a new dental hygienist. By utilizing an equipment financing program, we were able to help our client purchase a new dental chair from Tiger Medical and worked out a bridge loan for working capital to build and develop the remainder of the space and hire their new dental hygienist. In this case, a bridge loan was the best use of financing for working capital for our client because really there was only a gap of 6 months that our client needed to bridge before the revenue from the new equipment would stabilize to pay for the new dental hygienist on staff.

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    FAQ

    What is the meaning of bridging loan?

    In essence, bridge loans are utilized by small business owners to address short-term business expenses while they’re waiting for a more permanent financing option to come to fruition.

    What is an example of bridge financing?

    Suppose Company X comes across an opportunity to acquire its competitor, Company Y, for $1 million. However, Company Z is also showing an interest in buying Company Y. Since other types of financing take a long time to get approved for, Company X applies for bridge financing and gets approved immediately. Though Company X has received the funding, the company is still applying for other forms of loan to refinance the bridge loan.