Short-term bridge loans are designed to be exactly as they sound, a short-term funding solution, designed to ‘bridge the gap’ until a more permanent solution comes along. The duration of a bridge loans usually ranges between 6-12 months, however, these are not set in stone.
As with all loans, different loans are designed to suit different purposes, so the loan you choose will depend upon the situation you are currently in. One of the most important aspects of running a successful business is maintaining a healthy cash flow. This is something which can be more difficult that it first sounds. For example late customer payments, over running projects or products can all add up the liquid capital drying up.
The success of any business revolves around maintaining a healthy cash flow in order to ensure that projects and product development remain uninterrupted. A healthy cash flow can also help when new ventures or projects come along at an unexpected times. Many businesses have had to let possible ideas, projects and business ventures sit on the side line for too long, often becoming unprofitable and wasted due to the inability to act on them immediately. For example, this could range from missing out on a property at auction to a rival company beating you to the chase with a new innovative product.
Property development can be an extremely profitable business, but it requires a lot of investment capital in order to start any venture. Acquiring these funds needs to be either planned with plenty of time in advance, or available immediately, otherwise it could be the difference between securing and losing a highly desirable property. In these types of situation, this is where bridge loans can step in.
Often many people are unsure about using Bridge loans as a viable source of funding over a regular high street mortgage or bank loan. Both loans types have their merits and dependent upon your situation may determine the best route for funding.
Being able to use bridging finance is a great tool to have under your belt, and many property developers find bridge loans an essential part of the process, helping them to complete their property transactions quickly and easily. However, it is still important to be aware of the potential issues that come hand in hand with this type of financing, as if not used correctly it can potentially become a costly venture.
Bridge loans are becoming commonly used to help business maintain a healthy cash flow and keep businesses functioning during difficult periods. For example, you may have a large, overdue customer invoice, who are taking their time to repay. In this case by taking out a short-term bridge loan, you can maintain business as usual, without having to worry about taking out a long term business loan from a bank.
Bridge loans have always generally been associated with property purchases, however, many businesses also benefit from using bridge loans for a wide variety of business applications.
In today’s blog post we will discuss what bridge loans are and how to reap their benefits. We will also look at why they have become solely associated with property purchases and how they can be applied to other aspects of business.