How Businesses can Benefit From Commercial Bridging Finance?
Having access to the necessary funds to run a business can make all the difference. Unless you have a huge capital of your own that you are willing to invest, it is likely that you will need additional funding options to grow and expand your business. Today, more businesses are turning to bridging finance for several reasons, such as bridging the gap between current funding needs and available cash, and business expansion.
Bridging loans are often used by businesses when the cash flow is an issue and the funds are needed until the payments are received from the debtors. It is also great for startups to get off the ground or small business owners to invest in new business opportunities. Thus, bridging finance in London is a great alternative to a traditional mortgage that takes longer to arrange.
Whether you are a start-up, medium-sized business or large enterprise, all businesses need access to funds from time to time. But, if you need quick access to funds, then commercial bridging finance is an ideal choice. Let’s take a look at some popular reasons why business owners take out bridging loans.
Choosing the Right Bridging Finance Provider for Your Business: Top 8 Options
#1 Purchase New Premises or Offices
Buying a commercial property is the most common use of bridging loans. Be it a warehouse, retail shop, corporate office or other commercial space, investments into these kinds of properties typically require millions of pounds. That’s when a commercial bridging loan can help. Using a bridging loan you can branch out to other areas and reach more prospective customers. Using the office building as security, the loan can be repaid once the operations are expanded or profits are boosted.
#2 Purchase New Equipment
From time to time, a business may need to invest in new technology and equipment in order to keep up with the fast-paced world. If you don’t have adequate funds right now, but buying the latest equipment is necessary, then bridging finance can help you out. As the approval of the loan is fast, you can quickly buy the required equipment and then pay off the loan by making more profit using the advanced equipment.
#3 Seize Business Opportunities
You can also use a bridging loan if your business needs to seize a big opportunity that doesn’t come every day, but you don’t have the liquidity on hand to proceed with the transaction. With a bridging loan, you can solve the liquidity problem and complete the transaction, whether it is purchasing an asset or making cash payments for great deals. You can later repay the loan by raising funds through your usual business activities or through another source.
#4 Stocks and Investments
As far as you have adequate collateral ready on hand, you can take out a bridging loan to act fast and seize incredible investment opportunities, such as shares and stocks to maximize your return on investment. Once you start receiving returns, you can use that to repay the loan. However, make sure you invest in legit stocks and shares only and identify the risks associated with it before investing.
#5 Unplanned Payments
No matter how hard you try, there are always times when you find yourself with unexpected expenses. When such a situation arises, you can opt for bridging finance to arrange funds for paying unforeseen fines, tax bills, worn-out equipment or unplanned renovation work. With a bridging loan you can cover the cost of all unexpected payments, so you can continue operating your business smoothly.
#6 Short-term Cash Flow
All businesses experience peaks and troughs, and therefore, cash flow issues are very common. You need to make the payment of the outstanding invoices, staff wages and growing costs but haven’t received previous payments yet. Therefore, it is essential to find an alternate funding solution, such as a bridging loan to bridge the business funding gap. You can put your office building as collateral as well as show evidence that all your dues will be paid before a particular date and you will repay the bridging loan.
#7 Secure Property That Requires Planning Permission
Property investors often look for properties that require planning permission either to build or renovate it. However, some sites don’t come with planning permission. In that situation, you can use the bridging loan to purchase the property or land with the potential of planning permission. Once you purchase the property, the planning application can be submitted. If it gets approved, you can either use development finance to fund the development project or sell the property for a higher value and repay the loan.
#8 Exit Development Finance
Many property developers make use of development finance to get their projects off the ground, whether it is carrying out renovation work or building from scratch. However, there may be a delay in the development work and the developer reaches at the end of the development finance term. In that case, developers can use bridging finance to repay the development finance, and when the project is complete and the property is sold or refinanced, you can repay the bridging loan.
How Commercial Loan Works
A commercial bridging loan works pretty much the same way as a residential bridging loan. A lender will lend you a lump sum of cash based on the value of your assets, such as outstanding invoices or property you put as collateral. You will need to repay the loan in a definite time period, usually 3 to 18 months. If you fail to repay the loan in the specified time, the lender could take possession of your assets to compensate for their losses.
The Benefits of Bridging Finance for Businesses: Exploring Short-Term Funding Solutions
There is actually no limit on how much you can borrow through a bridging loan. Lenders are ready to offer millions of pounds to the right borrower and for the right deal. However, how much you can borrow with bridging finance depends on the value of your assets put as security, what industry you are in, the complexity of the transaction and associated risks, and your financial stability.
BridgingFinance4U can help you connect with specialist commercial lenders who offer high-value bridging loans for businesses at competitive interest rates. So, whether you experience cash flow problems in your business or wish to fix a short-term financial gap, get in touch with us today. Click to Blog