Bridging finance is a great way to help a business get off the ground and fulfil its potential. A bridging loan for a business is a type of commercial loan that will allow the business to access funder quicker than a traditional bank loan and over a shorter period of time. This enables a business to ‘bridge’ a gap until a more permanent source of finance for a business, for example from sales.
The example below outlines how a bridging loan could work for a small business during the festive season…
The situation:
A new start-up business is making and selling Christmas decorations, the start-up is approached by a large vendor wishing to place a substantial order. To fulfil that order the start-up will need to invest in additional staff and materials however they do not have the upfront capital. They will need quick access to additional funds to be able to accept the order, without a loan they will be forced to miss out on the opportunity.
How could a bridging loan help?
A bridging loan can be arranged in days rather than weeks which would allow the start-up business to move quickly and accept the order.
A clear exit strategy is an essential part of bridging finance, a lender will need to be comfortable that there is a strong exit route in place to be able to lend. In this case, the start-up would be able to use the profit from the substantial order to exit the bridge.
In order to issue a bridging loan, the borrower would need to put up an asset as security against the loan, this is traditionally property. The start-up may decide to use their business premises or personal property as security.
As a specialist lender, West One are able to offer a personalized approach to lending, working with speed and flexibility to deliver finance to those that need it temporarily and quickly. Here’s why you should consider working with West One for your client's short-term finance requirements:
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