What is the best type of financing for your business? Many small business owners would be tempted to respond, “The one that has the lowest interest rates,” but that’s not always the right answer. In reality, the best financing is the one that meets your company’s needs at the time. In many common situations that small businesses face, the solution is bridge financing.
What are bridge loans? They’re a type of short-term financing based on business assets. You receive funding based on the value of collateral such as inventory, equipment or real estate.
Traditional Funding Can Take a Lot of Time
One of the problems with conventional business loans is that the approval process can take significant time. We’re not talking about a few days or a week: Traditional loans can require several months before your company finally gets the green light.
Why is the approval process with economic development loans so excruciatingly slow? There are several steps that lenders need to follow. In the case of loans backed by the Small Business Administration, for example, it’s necessary for banks to check the applicant’s qualifications against SBA requirements.
During the application process, lenders have to check the application, look at your financial records, perform a credit check and meet to discuss underwriting questions. It also takes time to perform legal steps needed for the loan agreement, closing and other needs.
The Purpose of Bridge Financing
Fortunately, small business owners have several funding options available to help out in the meantime. That’s what bridge funding is all about. The purpose of a bridge loan (also called gap lending) is to “bridge the gap” with capital while you’re waiting for other sources of revenue or financing.
Ways Bridge Financing Helps Small Business Owners
Bridge loans may not have the same interest rates as long-term loans, but when it comes to flexible, short-term funding, nothing is better. There are many ways you can use this type of loan for your business:
- Real estate projects: A common way to use a bridge loan is to close on a residential or commercial property while waiting for long-term, low-interest financing to get approved. That way, you don’t miss out on the property of your dreams.
- Cash flow problems: Sometimes, businesses run into problems paying bills because clients haven’t paid their invoices yet. You can avoid credit problems by taking out a bridge loan in the meantime, then paying it off as soon as your customers pay you.
- Business opportunities: Use bridge loans to take advantage of volume-based inventory purchases, special discounts on equipment or other opportunities.
The Advantages of Bridge Financing in West Florida
Bridge loans offer incredible flexibility. You can get approved and receive funds in about a week. This type of financing can cover 100% of the cost of equipment, inventory purchases, real estate, emergency needs and other business essentials. At HML Solutions, we’ve been providing this funding option for West Florida businesses for a long time. Contact us to see the benefits for yourself.