Are you struggling to close a short-term financial gap? Short-term cash flow challenges can be highly stressful. Especially if you own your own business, ” lumpy ” cash flow can disrupt your operations and hurt your profitability. The good news is there are alternatives to bridge liquidity gaps, such as taking out short-term business loans near you. Here, we will discuss the bridging loan as a financing option to fill the cash gap.
What is a bridging loan?
Business owners often use bridging loans to fill short-term funding gaps. It is a type of loan that can be used temporarily. In addition, individual borrowers often use bridging loans to bridge the gap between selling their current home and purchasing their next property.
Short-term bridging loans are generally only available for short periods, usually up to 12 months. Although the interest rate is higher than a traditional mortgage, it is an excellent option if you need a loan quickly and are confident you can pay it off within the stipulated period. For example, if you are waiting to sell your property, a bridging loan will cover the costs until the sale is complete. Other everyday business uses include bulk merchandise advance purchases, equipment upgrades, or new IT installations.
What are the types of bridging loans?
There are generally two types of bridging short-term business loans near you:
Open bridging loans
The open bridging loan has no set repayment date, as you can repay the loan at your convenience. Borrowers typically use this bridging loan for renovations when they don’t know how long the project will take to complete. An open bridging loan is helpful for those who want to sell an existing property but have yet to find a buyer.
Closed bridging loan
A closed bridging loan includes a fixed repayment date from the beginning. This bridging loan is used for property purchases where the borrower has a specific time frame. It is helpful for those who have already finalised the terms of selling their current home and know when the purchase contract will end.
What are the benefits of short-term bridging loans?
The advantages of bridging loans for the short term include:
Bridging loans can be arranged quickly
Although this is well documented, bridging loans can be arranged quickly and conveniently. It is one of the biggest reasons to take a bridging loan. Life has surprises for everyone, and sometimes those surprises can negatively affect your business. If you need immediate financing for your property, there may be better solutions than a mortgage or a similar long-term loan. If you have a property available as collateral, a bridging loan lender may be an excellent solution for you.
In the case of bridging loans, there are often no monthly repayments
When things get tight or new projects come up, there is no need to increase your spending. Unlike mortgages, bridging loans are unique in borrowing as they often have no monthly payments. Instead, you repay the bridge loan interest at the same time you repay the loan. It makes bridging loan repayments much easier to manage than other similar types of debt.
Bridging loans are very flexible
Bridging lenders often come across strange and difficult trades, but they can be made to work with an interest rate that suits the situation. Mortgages and unsecured loans are often run to stringent standards and are primarily underwritten using computer-assisted scoring. However, bridging loans can be more flexible and typically get assessed on a case-by-case basis as property is involved, so the lender has less risk than an unsecured facility.
Get the benefits of real estate with a bridging loan
A bridging loan can provide you with the benefits of investing in real estate without the long-term commitment of a traditional mortgage. Bridging loans are short-term business loans that are used to “bridge the gap” between the purchase of a new property and the sale of an existing one. If you’re looking for a short-term business loan near you to take advantage of real estate opportunities, consider a bridging loan. This type of loan can be a great way to access the equity in your existing property to help you make a property purchase, and it can often be arranged quickly and efficiently.
Bridging loans make life easier
Bridging loans make life easier for individuals and businesses seeking a flexible and speedy financing solution. They are designed to provide prompt access to funds for those who need to purchase a property before selling their existing one or for those who need to make renovations or improvements to their property. By using a bridging loan, you can sidestep the prolonged and complex process of applying for a conventional mortgage and receive the funds you need within 24 hours. If you’re in need of a short-term loan, consider reaching out to a business loan lender who specialises in bridging loans. With their expertise and experience, they can assist you in obtaining the funding you require to turn your real estate aspirations into a reality.
How can you use a bridging loan in Australia?
Short-term bridging loans in Australia can be used for a variety of purposes, including:
- Buy property at auction
- Refinancing
- Renovation/DIY
- Investment
- Completion of a real estate purchase
- Payment of tax liabilities
How much can you borrow with a short-term bridging loan?
When it comes to bridging loans, the amount you can borrow varies depending on the lender. Typically, private, non-bank, and professional lenders can process loans quickly, within a matter of days, while traditional lenders may take weeks or even months. With a secured bridging loan, the loan is protected by an asset, such as your home, which speeds up the process, reduces the lender’s risk, and requires minimal documentation. The online application process also makes it simple and fast to get approved for a bridging loan. The loan amount can range from $100,000 to $10 million, and funds can be made available within a few days of submitting your application.
Bridging Loans vs Traditional Loans
Bridging loans differ from traditional loans in fundamental ways:
• Bridging loans tend to have shorter terms, with most loans lasting up to 12 months. This short repayment period is helpful for borrowers who need quick access to cash for specific purposes like closing the new home deal before the current home is sold.
• Bridging loans usually have higher interest rates than traditional loans.
• Traditional loans are typically for existing properties, while bridging loans can finance the purchase of properties under construction. For this reason, lenders often request additional collateral when giving out bridging loans.
• Bridging loans offer faster approval and funding compared to traditional loans, with private, non-bank, and professional lenders able to process loans within days, while traditional bank loans can take weeks or months.
Conclusion
As with all loans, you should consider your needs and financial situation before taking out a loan. Bridging loans are a valuable tool to bridge a cash flow gap in your company. Business loan lenders are typically more flexible than traditional institutions like banks. So if you’re looking for speed and a fast process, business loan lenders are a great alternative to banks.