How To Grow Your Business With Bridge Financing
Sometimes in the course of running a business, you find yourself in need of a small cash infusion. It may be difficult to get a traditional loan because of the small amount or you may hesitate to commit to long-term lending. Either way, you need capital to make ends meet temporarily.
Bridge financing is an in-between loan specifically designed to address short-term needs. The majority of these lending agreements last no longer than two years.
You may be wondering if bridge loans have limitations on how the funds can be used. This type of lending is actually quite flexible and allows you to put your cash where you need it. For example, you can use it to purchase equipment, which can be a big financial burden because it ties up capital you need for overhead. You can also use funds to cover new equipment and repay the short-term loan with profits generated as a result of more efficient tools.
Bridge financing can also be used to fund projects. To grow your company, you need to expand your capabilities, but that can be difficult with a tight budget. A little extra cash allows you to take on larger projects with confidence and deliver quality to your clients. When the project is finished, you have the funds to repay.
What about payroll? When you’re strapped for cash, the last thing you want is to forgo paying the people who keep your company running. A bridge loan can help you get through payday and last until the profits start rolling in.
One thing you should keep in mind is that bridge financing is usually structured differently than other loans. This includes collateral requirements and higher interest rates. Lenders set these conditions because of the shorter term, which would otherwise mean higher risk and lower returns for them.
So is this type of lending worth it? While the answer is different for every enterprise, it’s important to note the many benefits bridge loans have to offer:
- They’re easier to get because they’re secured
- They’re ideal for small businesses that may only need small amounts
- They don’t require years of payments and accumulating interest
If you’re in need of flexible funding, a bridge loan may be the perfect solution. There are lots of financial institutions interested in this type of lending, which means you can compare terms and get the best deal. Sometimes you have to spend money to make money, and a bridge loan can help you grow without the pains.