Bridge financing is often a short-term loan used by a business to navigate a period of financial difficulties. A venture capital firm or investment bank often issues the loan. Below is a list of ways bridge loans can create new opportunities for your business.
Accommodating Seasonal Inventory Needs
Most retailers prefer using lines of credit when purchasing inventory. Unfortunately, most businesses have maxed out the line and cannot access the funding. Many retailers buy the needed inventory with a merchant cash advance, which is often costly, to prepare for sudden surges in sales. Business owners can opt for bridge loans rather than cash advances to purchase inventory and refinance the bridge loan with sales proceeds or conventional business loans.
Purchasing Equipment
Your business may require purchasing secondhand equipment at an auction that provides a discount. Such opportunities do not last long. You may not be sure about the model you want to purchase and its value, making it hard to secure conventional financing for the purchase beforehand. In this case, other assets can collateralize bridge loans to finance the new equipment. You can refinance or pay the loan later with a longer-term loan usually secured by the purchased equipment.
Improving Real Estate
Bridge loans are an excellent option for renovating a property. Many manufacturing, industrial, and retail companies must renovate, expand, and improve their property to develop new offerings or expand production. Securing a conventional term loan is usually tricky, primarily if the property is fully collateralized. Bridge loans can assist you when an opportunity to expand your facilities, refine product lines or add value to property arises. You can then refinance your property once the work is complete, which will be at a higher value.
Acquiring Foreclosed Assets
Visiting a sheriff’s auction enables you to purchase some significant assets, but you are not always sure what you will find. The lack of specifics makes it hard to arrange conventional financing before bidding at an auction. Most lenders require clients to pay for such assets through loans secured by other assets or cash. Bridge loans can be used to bid on assets or make an offer and proceed to make interest-only payments until you can refinance with the conventional loan.
A bridge loan helps businesses to bridge funding requirement gaps. Bridge loans are beneficial when purchasing secondhand assets or conducting real estate transactions. Contact us at Artis Commercial Capital to secure a bridge loan to finance your business needs.