Starting a business is one thing—keeping it afloat is another. Aside from taking care of the managerial side of a company, it’s also among your responsibilities as an owner to ensure that funding is always accessible to the business. Starting capital isn’t enough because you’ll need to also factor in other expenses involved in running your venture.
Sometimes, funding can get scarce due to several reasons.
It could be that the company is just starting to pick up or the return of investment (ROI) isn’t as big as you hoped it would be. There are also instances when you need to settle payments with suppliers yet you find yourself short on cash. In such struggling times, you can consider getting a business bridge loan from companies like Novellus Bridging to help you with your financial ordeal.
Bridge Loan 101: Bridging The Financial Gap
A bridging loan or simply referred to as ‘bridge loan’ is a type of funding that’s usually in the form of a short-term loan available to companies that need to finance an immediate expense. It’s not ideal if you’re looking for starting capital for your company, but it can prove to be of big help if you require urgent funding to keep your business going.
It’s called a bridging loan because it intends to bridge the gap between enterprise growth and financial hurdles. Since it’s a short-term lending solution as mentioned, the approach is more flexible and ideal for companies struggling to get a traditional loan from banks and other types of lenders. In case you’re not yet sold on the idea, here are more compelling reasons to take out a business bridge loan:
Helps You Prevent Any Cash Flow Interruption
A business can be likened to a river and a boat in terms of cash flow—the water needs to keep flowing in order for the boat to stay afloat. Your funding is like the water in the river: once it gets stuck, the boat (your company) will also remain in one corner, not moving forward.
An interruption in your cash flow can be triggered by something as simple as not having the budget to pay for the supplies you need. It can also be as huge as the necessity to buy new equipment but then your money isn’t enough to fund the purchase. Then there are also unexpected running costs in small businesses that you may not be aware of, such as insurance expenses.
When you can’t meet those needs, your operations will be affected and your investment won’t deliver returns as projected. Getting a bridge loan could be the right solution if you want to make sure that your cash flow isn’t interrupted in any way. It can give you enough time to bounce back as long as the money you borrow will be used entirely for the intended purpose.
Speedy Processing
Another advantage of a bridge loan is the quick and relatively easy process involved compared to how other traditional options work. Banks and other conventional lenders usually take time to approve, process, and release loans. If you’re in need of urgent funding, the waiting game might not be a good fit for you. For such instances, bridge loans can come to your rescue. Getting approved for this short-term loan takes less time, thus giving you the convenience of addressing your financial problems in a swift manner.
Use It For Relocating
If you’ve been meaning to buy or lease a property so you can relocate your business, you can take out a bridge loan so you can have the money for the purchase. That way, you can immediately secure the property you’re eyeing before anyone else beats you to it.
Or if you’ve already acquired a property but you’re in need of additional money for new furniture, equipment, and supplies, the loan would be beneficial as well. You can be more flexible with your options and choose equipment that suits your business most.
Easy Repayment Terms
One good thing about short-term loans is that they don’t take a long time to pay back. The repayment period could be anywhere from several months to a few years, whereas with traditional options, it could take several years before you can let go of the burden. The most common repayment plan for a bridge loan is from six months up to two years, and you’ll be in full control of it. You’ll decide how long you want to pay for it depending on your capacity.
Higher Approval Rate
One of the most common issues with traditional loans is their strict approval process. It’s possible that you’ll submit an application and hope to get a call regarding approval, only to find out that you don’t qualify. That kind of outcome would negatively affect your business. With bridge loans, you don’t have to worry too much about getting rejected. While providing collateral can be considered a drawback, it’s a small price to pay if it means getting the money you need in a swift and seamless manner.
If you’re confident that you’ll be able to pay the loan back, there’s nothing wrong with putting out collateral. Also, your credit score isn’t considered a major factor during the assessment of your application. The reason being is that the fate of your loan will be decided based on the value of your collateral. This is good news to business owners who have yet to build good credit scores.
Final Words
A bridge loan is among the best alternative to a traditional loan that can take a while to be approved. This type of loan is ideal for business owners looking for ways to make ends meet without sacrificing the cash flow of their company. Aside from the speedy process, you also don’t have to worry about your low credit standing.
Repayment terms are flexible enough to meet your needs as well. So the next time you require urgent funding for your business, consider taking out a bridge loan. When used wisely, the money will allow you to take your enterprise to greater heights in no time at all.
