What is Bridge Financing?
Bridge financing or bridge loans are aptly named because they “bridge the gap” between an unexpected event and a long-term financing solution to prevent a cash crunch. While bridge financing is often used in real estate transactions for homeowners, businesses can benefit from it as well.
But how does a bridge loan work, you may ask? When should you use one?
Whether you’re putting a down payment on a business purchase or paying for emergency repairs, a bridge loan allows businesses to manage unexpected and costly events. When your business requires temporary financing, a bridge loan could be the answer you seek.
How Do Bridge Loans Work?
Bridge loans typically last for a year or less. They are short-term financing solutions, but they can be extended if needed. The payment structure of bridge financing varies; the loan may require monthly payments, a combination of upfront and end-term fees, or lump sum interest payments.
Depending on the situation and where you are located in the world, bridge financing and bridge loans go by other names:
- Interim Financing
- Gap Financing
- Swing Loans
As with any type of loan, the terms will vary according to the business’ needs and the type of bridge financing that is best for you.
Types of Bridge Loans
Businesses have many lenders to choose from when applying for a bridge loan, such as banks and credit unions. However, these traditional lenders typically have an extensive application processes where they evaluate credit scores and history, as well as debt-to-income ratios, which may hinder your ability to get the financing you need. And if you are deemed a qualified candidate, you may not get the most flexible and fast financing facility.
Save time and stress with Accord. We offer bridge loans that come in the form of:
Asset-Based Lending
Businesses get a percentage of cash based on the value of their assets. These assets can be accounts receivable, inventory, and machinery/equipment. This is a secured form of bridge financing since your business uses collateral to gain access to funds.
In special circumstances, businesses can also turn existing property into working capital.
Factoring
Businesses sell their receivables to a factor, which instantly turns their receivables into cash equivalent to up to 90% of the invoice value. When their customers pay, the remaining 10-25% is given to the company.
With AccordExpress Factoring, there is no term, and your bridge loan can last from as little as one month until your business is stable enough to get bank financing.
Equipment Financing
Avoid credit card debt with lease or loan financing. Whether you need new equipment and can’t pay it outright or want to leverage existing equipment, this type of bridge financing can solve your cash problem and help your business grow.
Do You Have an Opportunity to Take on an Unusually Large Project or Order? Bridge Loans Could Be a Viable Solution!
Accord Financial’s bridge financing strategies can be beneficial for these situations:
- Your business wants to open a location
- You want to acquire a new company and/or buy out the equity holders of the target company
- You need new equipment or updated software to continue serving clients or producing products
- A major client defaults on their debt
- A natural disaster or power outage affects your business operations
Accord Financial offers the short-term loan you need to get past the obstacle you’re facing, giving you time to find a better and long-term solution.
Get a Bridge Loan with Accord Financial
Our team can save you from many headaches by ensuring that bridge financing is a viable business strategy for your situation. We work to provide you with competitive interest rates and more for various industries.
Contact us today to find out how our lending services can help your business!