How a Commercial Bridge Loan Can Energize Your Business
There are many types of lending out there for all types of businesses. The type of loan you need depends on the stage your business is in and the size. There are times all you need is a little extra cash flow to get you from one point to the next, and that’s when you need a bridge loan. Think about the concept of a bridge and you will have an accurate assessment of exactly what and how this loan works. But the question is, how can you use this unique type of financing to bring new life to your business?
Bridge loans are typically only for commercial use. They are specifically designed to be short-term interim loans. This means that they are only utilized when a business needs to fill a gap, usually in between other financing routes. For example, you’ve been approved for a commercial loan, but the distribution period is within two weeks. Businesses also often use this type of lender for short-term projects with delayed turnaround times. A bridge loan would take care of any short-term projects that need to paid immediately. Then the bridge would be repaid when the loan funds become available.
Advantages of using this type of financing are those associated with it being short-term. Since it is short term, there is a short turnaround time for their receipt. In addition, their terms are usually only for six months to a year, sometimes with the option of additional six months to a year extension. Finally, there are generally no prepayment penalties associated with them. Because of these advantages, however, interest rates do tend to be higher.
Using a loan to bridge the gap can allow you to immediately access funds needed for things like repair or replacement. Using this bridge ultimately allows you to increase the value of your product, passing those improvements onto your products price, which in turn gives you a profit in the long run.
Because of these benefits, this type of loan can also be used to supplement your inventory during slow seasonal gaps. When revenue increases for the season, you could pay the bridge back and retain the rest of your profit.
There are many ways in which this unconventional yet practical lending option could be used to bolster your industry. It only requires a bit of observation on your part to see the areas and times that could use an extra amount of capital. From there, you could easily energize your business.