At some stage, most businesses will need access to funds to help realize an opportunity, help with operations or help get them out of a challenging situation.
How Bridging Loans and Bridging Finance Work for Businesses
In particular, start-ups often struggle with raising profits and sustaining cashflow (otherwise known as ‘working capital’). As such, working capital injections are often used by businesses of all stages of maturity to get, and stay ahead.
As a business owner, it’s wise to be across the different ways to access money in advance of when you need it. Fortunately, numerous methods are now available from a variety of financial services institutions including traditional lenders, like banks, as well as a growing number of fintechs and private lenders.
One funding option to consider is a short term bridging loan from a specialist lender, like Mango Credit. Just be sure to read a lender’s reviews to make sure they have a strong track record, and are legitimate and reliable – like Mango Credit Reviews.
Here’s how a bridge loan can help support your business.
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1. Temporary Financing
An advantage of utilizing a bridge loan is that it is extremely flexible and can be used for a variety of purposes. So, whether you need a specific working capital or money for investment needs, a short-term bridging loan can be a useful source of temporary financing.
Another advantage to this type of loan is its quick approval process. With private lenders, this may be as quick as 3-5 business days.
Private lenders also are renowned for having ‘Low Doc’ options, which basically means there’s not a lot of supporting documents required to be considered for the loan.
This means that you can get access to funds in the shortest amount of time, with minimal hassle. Short-term bridging loans also often have flexible terms, which allow you to either ‘roll over’ (i.e. extend the loan) or pay off the loan on or before the maturity date.
2. Business Expansion
Business expansion is a core goal for many companies, but it often doesn’t align with available cash flow. In this common scenario, funding can be a lifeline. A short-term bridging loan is often utilized to support business growth.
This may include investing in, or buying a business, obtaining bulk discounts or purchasing equipment to support operational efficiencies.
3. Investment in Real Estate
A bridging loan is a short term loan that can be taken out on top of your current home loan until the property is sold. It is a very fast and easy way to access your equity during the sale period.
A Mango Mortgages bridging loan can also be an ideal solution if you need to ‘bridge the gap’ between purchasing your new home and selling your existing one.
When you’re given the opportunity to buy a real estate property at a very good price but you’re short on cash, bridging finance can help get the deal over the line. In this instance, a bridging loan can be an ideal solution to obtain a deposit for a new property.
Equally, a bridging loan can help ‘bridge the gap’ between purchasing a new property and selling your existing one.
4. Funding Gaps
A short-term bridging loan can help ‘smooth the gaps’ in a business’ cash flow. Common instances include using a working capital injection to cover salaries as well as help manage invoice lags from late-paying customers (meaning when you deliver a service, but are not immediately paid for the service).
A bridging loan can also assist businesses in the manufacturing industry during periods when payment of products is required upfront, while the delivery takes months. Similarly, retail often uses a short-term bridging loan to stock-up to maximize seasonal sales.
Any construction project can go over budget due to a possible increase in labour or material cost. Or an emergency situation that needs extra funding may arise in your business. A short-term bridging loan can be a good option if there is insufficient funds to continue construction to escalate the completion date.
Businesses often need funding to grow. However, before you look out for funds, make sure you have a clear plan on how to use the money, and most importantly, how you’re going to pay it back. It’s always wise to consider growth plans in conjunction with an accountant.
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