There are several methods of business lending available in BC. Bridge loan is a type of debt financing which is normally used in BC when a business needs rapid and immediate financing to meet short-term requirements for a period of few months to one year. Most of the bridge loans are usually asset-based and supported by security such as real estate property, machinery &equipment or inventory. Usually a business goes for bridge loan financing for following purposes:
- To swiftly procure a profitable real estate property such as a residential building in a housing colony or a commercial building in a profitable business market.
- To procure and restore an existing commercial building to rent it on higher rates after completing all the renovations.
- To fulfil the working capital requirements of a business to get ready for expansion, to meet the requirements of an additional financing event or to fill inventory before a high sales season.
- To guide a company through as hort-term period before an IPO or an acquisition of other business.
- To purchase equipment where fast negotiations are required, for instance, auction purchases etc.
Benefits of Bridge Loan Financing
Given below are a few benefits of bridge loan financing:
- The Procedure Is Swift
Bridge loan financing takes a lot lesser time as compared to the traditional mortgage loans. Even though normally most of the financing cases may take around a week or two from application submission to release of payment, a smooth transaction might take only a few days before the whole procedure is completed. The main purpose of a bridging loan is to fill the small gap of time up until the working capital is raised.
- Loan Can Be Obtained For Varied Reasons
Several banks do not provide finance to the businesses to pay a tax bill, or pay mortgage loan, which was raised to purchase a rundown property. Given you can prove that you can pay back the loan immediately, the reason for which loan has been raised often does not matter (as long as it is not illegal).
- Reimburse ment Is Flexible
It is up to you how you want to pay back the loan. You can pay back the loan any time you want as long as the repayment period does not go beyond 12 months. Similarly, you can withdraw the loan money in phase sall through this period.
- Safe Mode Of Financing
To take a loan against an asset can often be a formidable task, even for the most veteran borrowers. But it is also one of the safest short-term loan methods. If you raise the bridge loan from a certified company, it makes it quite convenient for you to obtain funds without any difficulty and enjoy all its benefits.
- Easily Obtainable
As compared to other form of lending, in bridge loan financing earnings does not matter all that much. Because the borrower can pay back the due balance in one payment either by sale of the property or by refinancing, and this makes the bridging loan financing a very flexible method.
Risks Involved in Bridge Loan Financing
Financing costs of Bridge loan are usually higher as the speed of closing is rather quick. So bridge loans are usually used for short-term financing and not the long-term one. Borrowers do not mind paying higher rate of interests as it swiftly provides the money needed for various reasons. However, it is obligatory that the borrower pay back the loan more quickly as compared to a long-term loan. Money lenders might also charge fines or penalties in case of late payments. If you want to know about the institutions that offer financial help at most reasonable rates you can contact the business advisors of Business for sale BC for more information.