5 Benefits of Using a Bridge Loan to Finance Your Business

Bridge loans have become a popular financing solution for businesses. Also known as a “bridging loan” in the United Kingdom, it’s a short-term loan that’s designed to finance a business’s operations until the business secured long-term finances or generates a sufficient amount of capital. Bridge loans live up to their namesake by bridging gaps in financing. While there are different types of bridge loans, most offer the five following benefits.

5 Benefits of Using a Bridge Loan to Finance Your Business

#1) Easy to Obtain

You can obtain a bridge loan with relative ease. Bridge loans are easier to obtain, in fact, than traditional business loans offered by banks. They are classified as secured loans. Like all secured loans, bridge loans require the use of collateral. As long as your business has assets to use collateral, you shouldn’t have trouble obtaining a bridge loan. You don’t need good credit; you just need collateral to obtain a bridge loan.

#2) High LTV Ratio

Bridge loans typically have a high loan-to-value (LTV) ratio. LTV ratio represents the dollar value of a secured loan relative to the dollar value of the assets used to secure it. It’s not uncommon for bridge loans to have a 60% to 75% LTV ratio. If you secure a bridge loan with $100,000 in collateral, for instance, you may get up to $750,000.

#3) Low Fees

Most loans come with fees — and bridge loans are no exception. Fortunately, bridge loans have lower fees than most other types of loans. You may have to pay a closing fee, and in some cases an appraisal fee, but you shouldn’t incur any other expenses associated with a bridge loan.

#4) Supports Real Property as Collateral

If your business involves real estate development or investments, you can use real property to secure a bridge loan. Bridge loans are commonly used to finance real estate businesses such as these. Alternative lenders will allow you to secure a bridge loan with real property. You can still use other assets to secure a bridge loan. As long as your business has real property, though, you may want to use it as collateral.

#5) Flexible Repayment Schedule

Bridge loans offer a flexible repayment schedule. You’ll still have to pay them back in full according to the lender’s terms and conditions. With that said, the first payment typically won’t be due for a few months. Most bridge loans don’t require an immediate first payment. You’ll have a few months to secure capital before you begin to make payments towards the bridge loan.

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