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What is a Bridge Loan?
A bridge loan is a short-term loan designed to solve short-term cash flow problems, such as immediate financing needs bridging cash flow gaps. These unexpected circumstances require additional or unplanned funding or new business opportunities to capitalize on. Business owners often need to find multiple ways to bring in working capital to help with cash flow shortages. Bridge loans provide another possible solution, as they offer quick cash with flexible repayment options.
Many business owners utilize bridge loans, especially when working capital is limited. Businesses need to keep a financial plan that capitalizes on many different funding sources to own a 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 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 answer many businesses. The most significant benefit of small business bridge loans is that bridge lending allows small business owners to receive and use money quickly, with different options available to pay the funds back later.
A short-term bridge loan can be used to provide money and assets until a person or firm can get permanent financing or pay off a debt. On the other hand, Short-term Bridge loans (also known as swing loans) are commonly utilized in real estate transactions. They usually last six months to a year on average. They can be used to fund the purchase of a new house before selling your current one.
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?
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 personal money or being forced to pass on opportunities that would result in additional profit, business owners can apply for a bridge loan. The funds can often be wired within 24 hours of use. 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. Similarly, businesses do not need to demonstrate as high credit strength to qualify for bridge lending compared to other loan products.
Small 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 of the first things business owners need to ask when researching bridge loans is how a bridge loan 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 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. Typically, with a paperless, one-page application and limited documentation necessary, funds could be available in as quickly as 24 hours. Once the loan is secured, payments will be taken daily, weekly, or monthly 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 cash flow needs.
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.