There are many positives to taking out a bridging loan, but is it the right choice for your business? Bridging loans can often provide substantial financial aid in making the right investments in the shortest amount of time. Depending on your circumstances, a bridging loan could be just the solution your business has been looking for.
Here is a guide to using a bridging loan for your business.
An Introduction to Bridging Loans for Businesses
For those businesses who need quick access to funding in order to make crucial investments or even to keep their business afloat due to payment deadlines, bridging loans are a substantial solution. Or, it may be the case that your business is looking to either move or upgrade their premises and needs to make a new property purchase before the old business property has been sold. This is where a bridging loan comes in; to foot the bill during the gap of purchase and sale for a business.
A lender like Alternative Bridging Corporation can provide a dependable loan service for businesses.
The Advantages of Using a Bridging Loan for Your Business
There are several good reasons why a bridging loan can assist your business. These advantages include:
- Their short term basis, meaning you don’t have to get wrapped up in minimum monthly repayments and concentrate only on paying off the full loan amount when your finances allow
- The flexibility they offer with property investment
- The solution they offer for property investment if the right property is found but otherwise unaffordable without a bridging loan
- The flexibility on repayment options, meaning you can lobby for your preferred payment option
- The speed with which you can receive your loan amount, as bridging loans are traditionally fast and effective to arrange compared to other lending options
- The potential for credit score improvement for your business if you make the repayment on time
- The improvement for your business’s purchase options due to the ability to pay in cash through the bridging loan
- The low rate potential due to the market being very competitive
Bridging loans are designed to be very short-term, which means the terms are applicable for a period of anything from a couple of weeks to a period of twelve months, depending on the arrangement. The terms will always outline a full repayment of the amount due for the date of the end of the agreement, however.
There is an option to have an open bridging loan, in which there is no set end date. This can be helpful in those circumstances where you’re not sure of the preferred settlement date, or you do not have a definitive date for arranging the full finances to be repaid. This does, of course, mean that overall, the loan may cost more to keep it open-ended. A closed bridging loan is a preferable choice for a business with a conclusive end date to the agreement.
In relation to interest payments, you can also choose to defer the total interest amount to be repaid at the same time as the full repayment, rather than on a monthly basis. This is also advantageous for those businesses which do not wish to pay anything at all before the final settlement date.