5 Ways a Bridging Loan Can Help Business Owners Out of a Pinch

Written by
Rebecca Smith

Published
Jul 30, 2018

Jul 30, 2018 • by Rebecca Smith

Does your business need financing right now? Is your long-term financing taking too long to receive approval?

If so, consider using a bridging loan. Different than long-term financing, bridging loans offer money when you need it for a short amount of time.

Mean to "bridge the gap" between now and the financing you're trying to get, bridging loans help you get from point A to point B.

Though bridging loans are often used by homeowners, they're helpful for business owners too. Keep reading to learn about five ways a bridging loan can help your business out of a pinch.

How do Bridging Loans Work?

Bridge loans (or bridging loans) are temporary loans that are secured using collateral. They can be used as a way to put a down payment on a new home before the sale of your current home closes.

Bridge loans are helpful for businesses, too. For example, if you're looking for long-term financing but it hasn't kicked in yet, a bridge loan can cover the gap (i.e. create a bridge).

Typically, bridge loans are short-term loans. While you'll end up having two mortgage payments for a time, a bridge loan can be very helpful.

For example, you may have a few months before you need to pay on your bridge loan. And, you'll be able to move forward with a home purchase without the hassle of waiting for a sale.

You'll need to pay a bridge loan back quickly, due to short-term lengths. But you'll want to anyway since they usually have higher interest rates than other loans. You'll also want to pay it back so you don't lose your collateral.

Luckily, a bridge loan is just that--a bridge. These loans help you get from one point to another financially.

Once your home sells or your long-term financing kicks in, you can pay back the loan. In other words, you can "cross that bridge."

Ways Bridging Loans Help Business Owners

Bridging loans are great for homeowners and business owners alike. This type of loan may be perfect for your business needs. Let's look at five ways they can help.

1. Avoid Missing Out

Is there a great deal your business wants to take advantage of? If it requires funding, you may find yourself in a pinch.

Luckily, a bridge loan is perfect for this situation. If you find yourself in a time sensitive situation, a bridging loan may be the perfect solution.

If you wait too long to jump on that great deal, you may miss out on it. That's where your bridging loan comes in. Available more quickly than a bank loan, your business will be able to take advantage of the deal.

If you'll need longer-term financing, you can begin working towards that. But if you can't afford to wait, a bridging loan is the perfect solution.

2. Expand Your Office Space

Bridging loans are perfect if you're looking to expand the physical footprint of your office.

Is your company expanding? Are you looking to add another office or two?

If so, how will you fund the expansion?

In order to get started right away, you can use a bridging loan. You can use your existing office as collateral.

Bridging loans allow you to expand your office without waiting for funds. Start building in a matter of weeks, then pay the bridging loan back within a year.

Don't miss out on additional business because your company isn't bringing in enough to fund expansion now. Take out a bridging loan then use the increased income from your new locations to pay it back.

3. Engage in Investments

If you're looking for investment opportunities but don't have funds readily available, bridging loans can help.

Whether you're looking to buy some stocks, shares, or another company, a bridging loan can get you the funds you need.

4. Develop Real Estate

Are you in the business of real estate? Bridging loans can be used to construct homes or other buildings when you're short on funds.

Once the home sells or the business takes off, you'll have the funds to pay the bridging loan back.

Bridging loans can also help you finish off a property. Say you have a property with an existing building for retail shops, but you need a parking structure. A bridging loan provides a quick way to secure funds for the needed structure.

5. Flip Properties

Are you interested in purchasing a rundown business or home so you can flip it? If so, you may not be able to use a regular loan.

In this case, a bridging loan can help you purchase the uninhabitable property. You can then fix it up and sell it once it's up to par.

Once you've fixed up the property, a regular mortgage can be taken out to repay the bridging loan. Or you can use the funds you bring in from opening the business.

Choosing a Bridging Loan Provider

When choosing a bridging loan provider, don't just go with the first one you see. Take the time to compare your options.

Compare rates, requirements, terms, and qualifications. You may qualify for a loan from one lender but not meet the requirements of another.

Research the lender to make sure they're reputable. Go with a lender that will deliver what they promise and that offers terms that fit your needs.

The Benefits of Bridging Loans

There are many benefits to taking out bridging loans. If you need money quickly in order to take advantage of a great deal or opportunity, consider applying for one today.

Whether you're looking to flip a property, expand your business, or something else, a bridging loan may be the best option for you.

Do you operate a small business? Check out our guide to getting a business loan.