Bridge Loans Review
Why Apply for a Bridge Loan?
When it comes to financing, small businesses often face a funding gap between two long-term loans. Perhaps you are waiting on a new investment to come through, or maybe your current mortgage on the company's office space comes due and you haven't quite found a new mortgage to pay off the current one. Bridge loans, as their name implies, bridge the gap between two longer-term loans. They provide you with the capital you need to continue running your business while you wait for a more permanent funding solution.
This kind of gap financing gives your company flexibility to start new projects or buy new properties in a market where time is often one of the most important resources. Funding from new investors can take a while to get to you, so having an option to finance your projects in the meantime is important. While many bridge loan lenders exist, three common lenders are ARF Financial, Patch of Land and Liberty SBF.
Bridge Loans: What to Look For
Because a wide variety of lenders exists, you may be tempted to look for the lowest bridge loan rates. While loan rates are important, they often vary widely depending on the market and your individual situation. There are several other factors to take into consideration as you research lenders – elements that are generally more fixed than rates. When searching for a bridge loan lender, factors such as loan amounts, loan terms and approval times are all important.
You may not need millions of dollars to take your business to the next level. In fact, many businesses try to borrow as little as possible to save on overhead costs. The amount of funding you need depends on the type of project you are planning, and that amount typically varies greatly from borrower to borrower. A good lender will offer a wide range of loan amounts to fit the needs of any given project. On average, bridge loan lenders offer minimum amounts of $100,000 and maximum amounts in the millions. Some lenders offer bridge loans for amounts lower than $100,000, which is especially useful for smaller projects or for when you need just a little cash between larger loans. When you start searching for a lender, you will probably have an estimated project budget in mind. As you keep this budget in mind, you will be able to narrow down the options available to you.
When it comes to gap financing, the gap is just as important as the financing. The amount of time between your long-term funding can vary greatly depending on the origin of that funding. Bridge loan terms are typically a lot shorter than traditional loan terms, ranging anywhere from one month to two years. Because many lenders have prepayment penalties, making sure you find the right term length is essential to utilizing your funds in the best way.
Lenders often have different resources at their disposal. Sometimes they pair up with banks or private investors to provide interim financing to borrowers. While the amount of funding you can receive often depends on the banks or investors behind the lending company, approval times vary. Seven to 10 business days is typical for turnaround times, but some lenders can get you approved in as little as 24 hours. Your specific approval time will depend on the company's policies and processes, as well as on how much information you provide to the lenders about what you plan to do with that money and how you plan to pay them back. Business opportunities can come and go in a short amount of time. By paying attention to a company's advertised turnaround times and providing complete information to the lender, you can make sure you're getting funding when you need it most.
Bridge loans are often critical to the expansion of small businesses that don't have millions of dollars at their disposal. In an age when markets fluctuate often and the need to bridge gaps between funding grows larger, lenders offering bridge loans are flourishing. As you consider the criteria above, you can find a bridge loan lender that will fit the needs of your specific project.