3 Things You Must Know Before Getting a Bridge Loan

In business, you can’t predict every unfortunate situation that could arise. Loans are very common in the business world because there are times where a company simply needs money and can’t immediately and can’t survive without it. In order to protect their assets and their employees, they take out a loan. However, it’s not always that easy to take out a loan as a business. Lenders are generally more cautious and aggressive when it comes to the terms of a business loan. If you need money quickly as a business, your best alternative might be bridge loans. Just remember these three things before going after one.

Bridge Loans Are Given With the Intention of Long-Term Cash Flow

The nature of a bridge loan is to be a quick transaction, so the costs are generally higher. Bridge loans are often used interchangeably with the concept of hard money loans, which means that it’s a fast method to getting your cash flow on the right track again. However, you should remember that these loans are generally given out with the knowledge that your business will indeed be eventually taking in long-term income. You shouldn’t get a bridge loan if you aren’t expecting your business to make money for a long time.

Use Them Only if You Need Quick Money

A business might have an emergency come up and need cash faster than what a traditional bank loan would give them. For example, a company could be investing in commercial real estate and need quick money for renovations because of the timelines set by all the people involved in this transaction. In this case, a bridge loan is usually the sought-after loan in the real estate business, so they might consider it. Only consider a bridge loan if your money is needed quickly, and without it, serious problems will arise.

Bridge Loans Are Usually Based on Assets

The reason why these loans are dished out so quickly is that they’re generally based on assets and not the credit or personal income of the borrower. A lender will look at assets such as accounts receivable, real estate, or business equipment and determine how much to give you. Make sure that you have good, strong collateral when going into a bridge loan.

Before you jump on the bridge loan bandwagon, consider these characteristics that everyone should know about. Bridge loans are more on the riskier side, so it would benefit anyone considering getting one to explore the aspects of this loan a bit more.