business bridge loan

Why You Should Get a Business Bridge Loan, and How It Can Help Your Business Grow

January 1, 2022
By Admin

Intro

Have you ever been in a situation where your business was facing an urgent problem and needed funds but couldn’t get them because of the stringent loan criteria? Business Bridge Loans are ideal for those who need funds urgently to solve financial, operational, or business problems. This article will highlight how these loans can help you solve your urgent problems.

What is a Business Bridge Loan

what is a business bridge loan

The Business Bridge Loan from Business Finance is a quick funding advance. Borrowers can get accessible funds quickly without the hassle of long application processes that other lenders impose. It has the quickest approval time in the market, typically taking less than two weeks for underwriting and 10-14 days for closing on most cases due to our instant decision-making process – which means borrowers will have their loan throughout sooner rather than later! 

A bridge loan is a "gap financing", an interim loan with no annual percentage rate (APR). Bridge loans are typically not collateralized but can be offered based on personal or business income. They may have payment plans that range from one month to several years and lack flexible repayment options but still require interest rates averaging 12% - 36%.

Having said that, bridge loans may be a good option to get an early start in business.

According to mortgage expert Sara Ross, a bridge loan can be used to help fund the development of inventory or real-estate transactions. It could also be used as collateral financing in further developing an existing business and purchasing equipment. If you have been rejected for bank loans, research credit unions’ interest rates before deciding on a bank (rates are typically more competitive) so that you do not incur higher monthly payments or skyrocketing APR should something go wrong with your venture

How a Bridge Loan Works

wow a bridge loan works

A lender accepts the application and offers an instant decision. They take a call about whether you can receive funding that day or will need to wait for more information before being offered a loan. When approved, borrowers typically close loans in 14 days or less from flow-through closing dates; several of our most recent business bridge loan clients were able to get their money on the same day as approval! Alternatively, we offer up to 7-day terms for some applicants based on availability due diligence required within this time frame because these funds are quick cash lenders that require upfront collateral before disbursing from their funds.

Bridge Loans vs. Traditional Loans

bridge loans vs traditional loans

A bridge loan is a short-term loan product that bridges the borrower between getting approved for another form of financing and approval on their next project.  In regards to traditional loans, these loans typically report monthly interest rates with standard terms from 12-60 months. Platforms like Business Finance provide more specialized options such as Bridge Loans which are shorter in terms of lower interest payments when compared to credit cards or lines of credit, without jeopardizing security or collateral requirements.

Different Types of Business Bridge Loans

different types of business bridge loans

Term loans

A term loan involves a unique funding amount and repayment schedule. Borrowers are provided a lump sum of cash that they can reimburse over daily installments or when they are eligible for a more permanent type of financing. When you know exactly how much money you'll have, choose term loans.

Business lines of credit

A more flexible financing solution is business lines of credit. They have a pre-approved credit line that borrowers can call on as required. You can borrow up to your credit limit and only pay interest on the amount you have used.

Businesses can use lines of credit to cover an emergency fund or to pay ongoing expenses. They give an excellent bridge loan because they are flexible, convenient, and do not require you to repay interest on the money you don't spend.

Invoice financing

You can swap your unpaid invoices for cash with the help of invoice financing. It's a quick, simple way to get financing, and you'll be able to handle future payments without stress. However, invoice financing charges fees, and you are unlikely to get the full value of your unpaid invoices.

Merchant cash advance

Merchant cash advances are popular among retailers who are experiencing seasonal sales difficulties. They lend you funds upfront, which are then repaid over time via a low percentage of future sales. Instead of establishing monthly payments, repayment is based on your day-to-day sales.

However, Bridge loan solutions are available with the following specific types: 

  • General Bridge Loan that has no flexible repayment option but also doesn’t require collateral. A loan that is still under 6-month eligibility and flexible repayments

  • Retail Bridge Loan with credit card purchase protection

When faced with asking for funds from a bank, an entrepreneur may be nervous about turning to alternative sources simultaneously. Bridge loans might seem like the answer if your credit score is poor or if you do not have collateral that banks accept. With some preparation and financial sense, it can often lead to a better bank loan by utilizing more competitive rates in the future when ready. Banks are structured around assets of all sorts so completing little bits of preparations now could save money on interest later since Bridge  loans offer debt that has no collateral typically based on personal or business income

Competitive bridge loans often offer lower monthly payments and shorter payback periods, sometimes as few months or up to a year.

Benefits of Business Bridge Loans

benefits of business bridge loans

Borrowers receive their funds quickly so they don’t have to wait long for start-up capital. This can give access to increased productivity sooner, free up cash flow to maintain business while waiting on other funding, and help you invest in your projects.

Bridge loans provide stability and help SMBs get better visibility into their credit profile 

Durable collateral may be in place to support borrowing more from the bank once your business is more established 

A bridge loan will help defray one's monthly bills while waiting for that much anticipated long-term investment or growth opportunity. The delay between getting funding- and the final payoff can be significantly shortened with a combination of interim financings such as small business bridging loans and potential earning opportunities 

In many cases, this helps focus on self-improvement by allowing time for a business to reach its goal of achieving long-term viability

There is also an advantage in bridge loans as they are backed by collateral such as articles of incorporation and certain types of real property. In this way, you need not worry about making the repayments when it gets difficult. The amount being loaned depends on your earnings from that point onwards, so once earned enough one can start repaying the loan with ease at a fixed interest rate (for up to 5 years)

Bridge loans also provide SMBs with better visibility on where they stand against their repayment schedule. If a bridge loan is set up and your business's performance does not meet the expectation of the bank, then you can request for it to be adjusted accordingly 

There are many bridge loan options available such as business bridging loans or micro-lending but one should still get in touch with experts when considering taking this step.

Risks of Business Bridge Loans

risks of business bridge loans

Bad credit could increase borrowing costs as opposed to traditional banks accepting lesser collateral or income when certain programs are not available. Make sure other financing options can still be taken advantage of before taking out a bridge loan, but also make sure that the typical terms for these resources are advantageous enough. The average interest rate is higher than those charged by different types of government-backed loans or the increasing rates from credit cards because B-loans only stretch to meet your needs when needed. B-loans are extended through an electronic platform to make them easier to access.

How Business Bridge Loans Can Be Useful

how business bridge loans can be useful

Bridge loans are used to complete a series of purchases or investments. They allow borrowers to avoid incurring debt in each subsequent transaction until the overall project is completed. This arrangement can be helpful for some types of real estate financing, construction financing, and acquisitions. 

For example, bridge loans can be useful for refinancing existing mortgages during times when loan interest rates are lower than their original home loan rate. A homeowner could use this type of financing to pay off an adjustable-rate mortgage that is resetting at unfavorable terms and then refinance the house with a fixed-rate mortgage at more favorable terms.

Bridge loans are also useful in making improvements while the bridge payments stretch out over time. If a business owner can afford one or more lump-sum payments per month of principal, then that might be an option for financings urgent but not critical purchases such as supplies and other items. 

For example, a project manager could get approved for three on-site checks payable at $500 each with balances needing to reach six figures before she can make any spending decisions about it (items like window screens). She could use available funds from this loan to pay all the immediately needed bills toward completion of her objectives rather than having to take out a long-term loan or apply for grants.

In regards to home improvement projects, bridge loans can be useful when making improvements that are large or expensive enough that they cannot affordably be paid off in just one (or two) installments without incurring additional interest and fees on top of the original investment cost. This might include remodeling an addition onto your residence which requires significant work over quite some period with little margin for error. To avoid making costly mistakes with important rooms such as bathrooms, kitchens, and other spaces where people spend more hours than others performing random activities like watching TV, a bridge loan might be warranted by setting up an installment plan of payment at periodic intervals that require more than one payment. This can also allow the homeowner to take on project debt without having it crystallize as interest-bearing debts within their balance sheet and increase leverage ratios (debt/assets) which has other risks such as asset bubbles caused by excessive borrowing overgrowth or hyper deflation triggered upon bankruptcy if business temporarily flounders causing a sudden decrease in value of equity holdings). 

All this is especially true for older homeowners facing declining home values who have accumulated considerable equity through reinvestment of interest and principal in financing a home’s costs. Their mix of debt liabilities, equity, and retained earnings may overshoot their current value significantly but they are safe from the default (with enough income to make the payments) just like other financially secured individuals have no problem making full payment on an auto loan or mortgage. 

Advantage of Getting Bridge Loans from Commercial Lending

getting bridge loans from commercial lending

  • We expedite the funding process, typically the same day you apply.

  • Choose a longer or shorter repayment period depending on individual needs.

  • No late fees so interest is paid only when lenders are repaid in full by borrowers – no foolish penalties such as overages! 

  • Greater terms are available with lower costs if needed for certain situations (faster cash loans) than credit cards and lines of credit according to our platform's pricing guide. 

Apply Now for a Business Bridge Loan with Commercial Lending USA

Contact Us for more details about Business Bridge Loans at (855) 365-9200.

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