Every business owner knows the importance of having sufficient working capital on-hand to fund operations and propel growth. However, sometimes a need for cash arises that wasn’t anticipated, and cash is needed quickly. These rapid turnaround needs can include an important business opportunity, a competitor’s stumble, a surge in growth, or perhaps an emergency repair. When companies need cash right away, bridge loans can be the perfect solution.

What Are Bridge Loans?

A bridge loan isn’t a specific type of loan. Rather, it refers to types of commercial financing that are both temporary and short term. Bridge loans are usually paid back quickly (within one year) and typically have higher interest rates than longer-term financing due to the quickness of the underwriting process. Bridge loans are used to “bridge” the periods between another longer-term financing.

What Are Working Capital Bridge Funding Options?

• SBA bridge loans. These are used with both SBA 7(a) loans and SBA 504 loans. 
• Bank loans are often a preferred type of funding due to lower costs of capital, but they do require exceptional financial conditions and may not have many options for small businesses. 
• Alternative loans. 
• Asset-based loans, using assets as collateral including accounts receivables, personal or business real estate, inventory, or business equipment and machinery. 
• Merchant cash advance. This is generally the quickest way to obtain cash but may be the most expensive route to take.  

Avoid Two Common Mistakes

It is important to avoid two common mistakes with bridge loans:

• Not acquiring the right size of the loan. Carefully calculate the funding amount needed, otherwise, a company may not be able to bridge the time needed to acquire more long-term funds. 
• Make sure documentation is complete and correct and that a payback plan is in place to persuade investors or lenders to provide the funds needed.  

Seek Expert Financial Assistance

Contact Increase Lending for financial solutions to address your cash flow needs and growth goals. Our experienced financial professionals can help you secure funding to meet your business’s financial needs.