A Bridge Loan is a short-term loan that small businesses use for their short-term financial needs until they find a long-term option. It generally comes from an investment bank or a venture capital firm.
According to Forbes, over 28 million small businesses opt for these. Bridge financing keeps small businesses out of water when their first lender demands their money. This article highlights 5 benefits that bridge loans hold for small businesses.
1. It’s Quick and Convenient
The purpose of a bridge loan is to quickly fill in the gaps in financing for a business to sustain itself in the long run. There wouldn’t be any point in a bridge loan if it stayed for longer.
For instance, if you have a construction business, you’ll get paid at the beginning and the end of the project. You’ll have to bear the expenses in the middle by yourself. That’s where a bridge loan would act as financial support to keep you going until you get the final payment.
2. It Keeps Your Payroll Updated
If you can’t meet your payroll requirements, your staff will question you. They’d want money for the services that they provided. In this situation, the bridge loan comes in handy.
You won’t have to wait for your client’s invoices or worry about finding a replacement for employees who have left your company. An updated payroll will keep your workers motivated.
Moreover, you can also use the loan money to expand. It’s essential before you take on new clients and projects. You wouldn’t want to exhaust your current employees. Therefore, using a bridge loan would be a smart choice.
For a small business that works in the service industry, marketing can help them cover their initial investment. If you don’t have the resources for advertising, a bridge loan can help you in that regard.
You’ll not only be able to have a killer marketing campaign, but also have some profits to sustain yourself in the future
4. Greater Chances of Early Investment
Have you lost a potential client because you were waiting to start a new project? You wouldn’t have to do it anymore. Bridge loans help you to invest early and reap the benefits of the chances that you get.
Maybe you’re waiting for money so that you can purchase the equipment for your team to work with. Waiting also means wasting your money and missing out on potentially lucrative opportunities. It increasing your employees’ downtimes and increases their frustration.
A bridge loan can enable you to purchase the equipment at your earliest and be productive and running in no time.
5. You Don’t Borrow Against an Asset
Bridge loans are unsecured. It means that you don’t have to use any of you assets as collateral, like some property or equipment of similar value.
With a secured loan, an asset, called a ‘collateral,’ is kept in the agreement. If you’re unable to pay back, the lender can claim ownership on that ‘collateral.’
Based on the unsecured bridge loan format, you have less risk, and the lender takes on more. It makes you feel more stable.
Are you looking to get a bridge loan for your small business?
Global Capital Partners Fund is there to help. We offer the best bridge financing and hard money loan programs in Baltimore, MD. Set up an appointment with our consultants today.