Bridge financing is a unique type of loan used under specific circumstances. Usually, they are used to cater to immediate needs. Like the name implies, bridge financing is meant to be used as a bridge to make it to a point when the investors have a more long-term solution.
Multiple financial institutions provide bridge financing like banks, online lenders, private lenders, and hard money lenders. Let’s examine a few uses of bridge financing in commercial settings:
Purchasing Commercial Real Estate
Investing in commercial real estate is one of the most prominent uses of bridge financing. This is because bridge financing allows you to acquire funding quickly, faster than any other type of loan. The fast funding helps you secure the property because many sellers prefer to receive their payment as soon as possible. Furthermore, it helps beat any competition from other investors.
For instance, suppose you are looking to purchase a store on an oceanfront pier. This is a property many people would like to purchase, especially since it’s in a busy commercial area. With bridge financing, you can buy this property and refinance your finding to find more affordable long-term funding.
Preparing Business For Acquisition
While bridge financing is most associated with commercial real estate, it can also be used for other purposes. For instance, imagine your firm is in the process of being acquired by another company. However, in the short-term, you will need steady cash inflows. In this case, bridge financing can allow you access to capital, as your company is being bought out.
This sort of arrangement qualifies as bridge financing because you have a future long-term source of funding available. You’ll need financing on an interim basis until the acquiring company provides the firm with long-term financing.
Buying Immediate Inventory
Another very common use of bridge financing is to stock up on inventory. Often you have very urgent business needs that can’t be catered to by the company’s funds or traditional loans. In that scenario, bridge financing can be a very good option.
For instance, imagine you come across a very large liquidation sale. You need funds to acquire what you need immediately. Bridge financing is a great tool use in this scenario. After you’ve acquired the inventory you need, you refinance your loan to make it more affordable.
Would you like to know more about hard money loans or bridge financing in St. Louis, MO. Reach out to Global Capital Partners Fund. Contact us for more information.