Our partners, Together, share how bridging loans work and how they could be of benefit to your business.
Time is money, and that’s never truer than in the world of business. And for businesses that need to borrow money, there’s rarely time to waste – so waiting weeks for a mortgage or fixed-term secured loan to be approved isn’t always an option.
One alternative is short-term finance, or a bridging loan, which can – in some circumstances – be arranged and funded within a matter of days. Specialist lender Together has funded more than 57,000 bridging loans since 1985*, winning them accolades including Commercial Lender of the Year, Bridging Lender of the Year and Specialist Lender of the Year.
They’ve created a simple guide to how bridging loans work, and how they can be used by businesses at various points during their lifecycle.
How bridging loans work
Together’s bridging loans are designed to span the gap between a payment going out, and a payment coming in. They last up to 12 months, and you only make interest payments each month – the initial loan you repay in a lump sum.
If you'd rather not make monthly interest payments, you may have the option to roll it up and add it to the lump sum. Or it could be deducted from the advance you get at the start of the loan.
You can use a bridging loan to leverage the equity you’ve built up in your premises, to expand your existing space or grow your team. This may be particularly helpful when you have the opportunity to secure a large new client but need to increase capacity in order to service the account.
Alternatively, retail and restaurant businesses can take advantage of a bridging loan to grow their chain of outlets. You can put down a cash deposit (or use existing premises as additional security) to cover some of the up-front expenses involved with acquiring a new outlet:
· Securing the purchase of an additional property.
· Completing a new shop-fit.
· Hiring staff.
· Purchasing stock.
A bill can throw any business’ cashflow into disarray and prevent you from focusing on the important job of running the business. A bridging loan can be used to clear bills in the short term, while funds are raised by, for instance, selling property or assets.
Every growing business outgrows its headquarters at some point or another, and a bridging loan can be used to secure a new space while the previous one is sold. This may be helpful in instances where business operations must remain uninterrupted during a move.
Owning both premises temporarily gives you the option to appropriately refit the new space and migrate teams one by one.
In instances such as these, the bridging loan is repaid using the proceeds of the previous property’s sale as soon as it’s completed.
Cashflow pinch periods
Cashflow is an issue for many businesses, and bridging loans can help those who need money in the short term to make money in the longer term. For instance, many manufacturers may need to invest in raw materials or temporary storage space to accept a large order or ahead of an expected seasonal rush.
Contact Together or visit us online for more information or to discuss funding options for your business.