In today’s uncertain economic market, it is likely that most small businesses will experience hardship at some point. Cash flow is a major concern, as sometimes bills are going out before your clients have paid their invoices. It’s difficult to balance the books, and to keep the business going you may need to consider applying for finance.
Lots of companies depend on loans and other alternative finance solutions to keep them afloat. Most of the time it’s their only option to stop the business going bust or to keep up crucial payments. Sometimes these difficult times are out of the control of the business, it is often external factors which influence their position. However, you need a good back up financial plan to get you out of the red and into a safe place while the market improves. A bridging loan could be the answer.
What is a Bridging Loan?
The name of this loan is based on imagery – think of a bridging loan as a temporary financial bridge, to keep the borrower out of water until they can pay the money back. Bridging finance is a short term loan, up to millions of pounds, which is usually secured by against property.
What are the Advantages?
As a secured, short term loan, bridging finance can be arranged very quickly. This makes it ideal for property investors or anybody looking to buy a property at auction or looking to renovate a property for resale. Bridging loans are typically paid back between one and 12 months, which is why they are often used in buying and selling property.
However, businesses can also benefit from bridging finance if they need help with cash flow and are expecting a large chunk of income in the next year. For example, businesses with a seasonal sales fluctuation may require some extra cash in the winter, but know they will be able to pay it back in the summer when sales increase.
Bridging loans are a simple way to take advantage of short term opportunities. They are also relatively easy to be accepted for, as they are a quick loan with no credit checks – often a logical choice for lenders who have been refused for other types of loans. However, you must make sure you have a strong repayment plan in place as it can become difficult to repay the loan in such a short amount of time.
Interesting in applying for bridging finance? Call us today to speak to an alternative finance advisor.