With so many different financing solutions available to small business owners, it’s hard to pick the solution that’s best for you. Some solutions are meant for long term purchases while others are meant for day to day working capital. A popular form of financing that will give you quick access to capital is a Bridge Loan.
Bridge Loans are meant to “bridge” a gap. Whether it be a cash flow gap caused by slowing paying customers or a cash flow gap while you are waiting for long term financing, this can give you the cash you need to operate your business successfully. Bridge oans can be a great solution for your short-term needs, given that you fully understand its nature. This is why it’s important, even critical, you work with a lending adviser who can provide you with the guidance and expertise you need.
Short-term needs require short-term capital. For that reason, bridge loans typically have terms that range from 3 months to 18 months. This makes it an ideal financing option for businesses looking to bridge any cash gaps without having to worry about longer payment terms.
Aside from that, here are 4 reasons why you should consider applying for a bridge loan:
Bridge Loans are not only short term in nature, but they also come with a short application process. The process when applying for bridge oans normally is between 24 and 48 hours. If you have all the documents needed, the process may even become easier and faster.
Financing for your business can be in place in as little as a few days. By having an option like a bridge loan, you can grab on to any opportunities that come your way. With enough capital on hand, you’ll be able to make quick deisions and act on them without having to worry about money. By having this flexibility, you can purchase new inventory, buy new equipment, hire new employees, or promote a new marketing campaign.
With speed also comes flexibility. Flexibility is an important benefit that comes with bridge financing. This feature enables you to choose a term and a loan amount that is best suited for your business. By having different term options, no prepayment penalties, and varying loan amounts, you have the ability to pick the solution that is just right for you.
3. Less Documentation Requirements
The most frustrating aspect when applying for financing is the constant requests for documentation. Sometimes it feels like there’s no end in sight. When you do arrive at the end, banks or lenders then asks for another set of documents for additional proof.
With bridge loans, however, it’s the opposite. You won’t have to worry about a long list of documents. With one simple application and 6 months’ worth of bank statements, you can qualify and get approved. The funds will be wired to your bank account immediately after approval. Lenders traditionally avoid the usual bank processes, thereby enabling you to focus solely on growing your business.
4. Quick Repayment
Bridge loans are a type of short-term financing, which is one of its highlights. This means, the funds you get from this financing should only be used for short-term needs. If you need additional financing, you’d have to apply for another type of loan to cover the gaps.
Quick repayment periods are great since entrepreneurs won’t have to deal with carrying a huge amount of debt over a long period of time. Having a quick repayment will enable you to cycle through cash and avoid having long term debts on your balance sheet. At the same time, you can improve your cash flow gap without having to take out additional debt.
Bridge loans shouldn’t be used for long-term investments. For instance, if you need equipment for your business, taking out a bridge loan isn’t the best way to go. You can either apply for a line of credit, equipment financing, or term loans to pay for that.
5. Bridge Loan Doesn’t Require Collateral
Business loans typically require collateral. This reduces the risk lenders are facing. However, since bridge financing is a type of unsecured loans, the borrowers won’t have to present an asset. This is especially beneficial for businesses who haven’t acquired enough assets to pledge for loans, yet.
When you’re taking out a bridge loan, the lenders are facing more risks than you. This means, the lender is putting their full trust that you’ll be able to repay the debt on time. You as a borrower, should also do your best not to default because not only will it help destroy relationships with vendors, but it will also affect your credit background badly.