The banking system is struggling to get back on its feet after taking a hit in the financial crisis, which is bad for everyone and especially small businesses. This had led to many people looking for alternative ways in which to source money to fund expansion and growth.
Just because money isn’t so freely available doesn’t stop business opportunities coming up. This could be from having to make a quick offer on an improved business premises or boosting cash flow when waiting for invoices to be paid from customers. This has led businesses looking for different ways to raise cash, and the bridging loan market has matured into more than for simply property.
Therefore the question everyone seems to be asking is, can a bridging loan work for my business and how? Let’s take a look:
Why not go to the bank?
Banks are increasingly reluctant to lend money where any amount of risk exists. As they continue to patch up their balance books, lending to small and medium sized businesses has fallen down their list of priorities, even if you can prove you are profitable.
Although in a lot of cases, for longer term lending, the bank is the best place to start, if you need money to ease cash flow problems you may have to look elsewhere.
What other options do I have?
A lot of people start and run their own business with their own money; this could be redundancy cash, personal savings or possibly money borrowed from family. A lot of small businesses use personal credit cards and overdrafts to cover the smaller business expenses such as buying stock or to buy a space to sell your product or service.
Government grants also exist in relatively high quantity, however as mentioned previously they are difficult to fully get to grips with. The Princes Trust and the recently expanded Start-up loans scheme are available to the young captains of industry out there too.
What is bridging finance?
Bridging finance, also know as bridging loans is essentially a way to free equity in your assets short term, possibly without the need to sell. These assets are usually property, but can also be any land or retail property that you may own, with the majority of bridging lenders offering a very personal service who are keen to fully explore your situation.
Traditionally bridging loans were used to bridge the amount of time between purchasing a house and receiving the payment for the house you are selling. However, as the banking system remains tight, the bridging sector has stepped up and offered this service to a range of individuals and companies that need access to capital for only a limited amount of time.
Bridging finance is a great opportunity for businesses and entrepreneurs to solve some of their cash flow issues. This is clearly a short term solution for startup’s cash flow, in the long term you a business will need to build a strong revenue and positive cash flow to succeed.
So is a bridging finance good for small businesses and entrepreneurs?
This simply depends on your personal situation. If you have no personal or commercial assets, then bridging loans are unlikely to be for you. However, if you need money to buy extra stock to deal with unexpected demand, and you also own a buy-to-let property with equity, bridging loans is likely to be a great option for you.
It is important to remember that bridging loans are short term, with the maximum term usually a year. However, for short term needs, they are arguably one of the quickest and hassle free services on the market that assist the cash flow of businesses. Bridging loans are by far a safer as a short term finance solution when compared with payday loans or any other short term lending system.
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