There are many reasons why your business might experience issues with cash flow.
It’s all a part of the ebbs and flows of business; something that’s especially important to be aware of as we enter into a recession. External funding can really make the difference, but it’s not always easy to secure.
Every business, from well-established firms to up-and-coming SMEs can struggle to get approval for a business loan or mortgage. Lenders protect themselves from losing money by limiting their risks, and if your project is deemed risky, you may not gain access to the capital you require.
That’s where bridging loans come in, allowing you to access the crucial funding you need in a matter of days.
In this article, our experts explore how securing a bridging loan can help you to fund commercial products on a short timeframe, so whether you need a deposit for a property or financing for a development project, your business can progress and succeed.
What is a bridging loan?
A bridging loan is a short-term contract that enables you to ‘bridge the gap’ in your funding until more permanent financing becomes available. It’s an ideal arrangement if you need rapid access to significant funding to finance a commercial project. They are also considerably more accessible than other forms of financing such as mortgages and other business loans.
How is a bridging loan different to a standard loan?
The crucial difference between a bridging loan and a fixed-term loan is how it is repaid.
A fixed-term loan, such as a mortgage or personal loan is where you pay back what you have borrowed over time and in equal instalments. The result is that at the end of the term, you will have paid back the full amount, including interest.
In comparison, a bridging loan is where the monthly repayments consist purely of the interest, rather than the overall amount that was initially borrowed. You will then be able to pay the rest as a lump sum at the end of the term, which is usually around the 12-month mark. There is also the option to pay this sooner if the funds become available to you.
Another way that bridging loans differ is how long the term lasts. A fixed–term loan is often set over a long period (potentially decades), whereas a bridging loan is set at a maximum of 12 months.
When can you use a bridging loan?
A bridging loan is a versatile type of financing that suits many businesses in multiple industries. There are several circumstances when a bridging loan can be an appropriate solution, including:
- To secure property
- To fund property development
- To cover upfront expenses
- To win investment opportunities that may not wait for you
- To pay invoices or tax bills
How long does it take to secure a bridging loan?
Perhaps the most appealing aspect of a bridging loan for most businesses is the speed at which it can be acquired. A broker with a network of lenders will be able to secure finances for most businesses within several days. This quick access to funding makes progress seamless.
How much can I borrow?
When it comes to financing, each business will be unique in the sense of how much finance it requires from the lender. Each situation will have a different cost, meaning that some businesses will only require just enough to pay off expenses, while others will need a far greater sum to fund property development or portfolio expansion.
It’s worth noting that there are no limits on the amount you can borrow; it all depends on the value of the property/the security you are putting against the loan. However, you will be able to gain access to more significant amounts through an experienced broker, who will be able to source the best rates from a wide variety of lenders.
Bridging Loans from Bespoke Commercial Finance
At Bespoke Commercial Finance, we believe you should have access to finance at every stage of your business development. Our clients trust our established network of lenders; it’s our passion to find the right deal for you at the best available rate.
Our in-house team of experts are available to advise on the best source of finance for your venture. We can secure bridging loans in no time at all – the sooner you reach out, the sooner you can get your funding!
If you have any questions or want to know more about our finance options, don’t hesitate to get in touch with our team today.