If you have a business and need a quick loan, for a short period of time the best option for you could be bridging finance.
The Main Banks.
The first thought for most, when looking at raising money for their commercial venture, would be to either get an overdraft or some other loan secured on their business assets from their current or another mainstream bank.
This route has its advantages, of course. The loan will probably have a cheap interest rate, relatively, and you are going to be familiar and comfortable with the institution you are dealing with. That said, low rate loans are normally more difficult to raise as the application process is strict, it can also take a long time to come through, which is not ideal if you need finance in place quickly. The company will need good accounts and a clean credit profile, which in times of recession is not always an easy thing to achieve.
If you business can wait the 6-8 weeks it will probably take for a large high street lender to give you the money, and you fit the profile then by all means go to the banks. The cheaper you can get finance the better, the less your outgoings, the more profit you make.
Getting Capital Quickly.
What happens, though, if you are looking to raise cash as fast as possible and for short periods? Business bridging might be the answer. Short term loans are no longer just used to bridge the gap between a property sale and purchase. It is being used for all sorts of reasons from paying off bills to buying stock for a large order.
The idea of a bridging loan is to have the finance in place in as quick a time as possible and with the least fuss. When borrowing money, especially large amounts, there will always be hoops to jump through but a bridge application process is normally less rigid and stringent.
It is likely, particularly if it is the first time you are going down the alternative finance path, that these lender names will be unfamiliar to you. The way the market is expanding, though, we doubt that they will be for long. Using this sort of finance is moving towards the mainstream as business owners see it as a valuable tool to get hold of the money they need to drive their company forward.
The advantages of a short term bridging loan are the speed and flexibility you can achieve. Though it is not the norm, in theory one of these loans can be in place within a couple of days, even for very large amounts. The terms can also be suited to your needs, so if you only need the money for a week that is no problem, or you might want a facility for 12 months, again, no problem.
You do pay for that convenience though – you can have money fast or cheap. The rates are much higher that, say, a conventional mortgage but this is not really a fair comparison. A normal mortgage is based over a term of up to 35 years rather than a few short months, so the lender needs to collect interest in a shorter period. Also, the speed in which many need bridging means that some corners might be cut in the underwriting process, giving way to more risk for the lender.
The market is consistently growing, though, as more and more business owners see these loans as a means to an end to aid their business. For many, not having access to bridging could spell the end of the company and are happy to pay the higher rates. Many more use the flexibility of these loans as a way of making profit, for example allowing the quick purchase and sale of a property. Whatever business you are in, should a quick need for cash arise it is most definitely worth considering a bridging loan.