Short-term loan or bridge loan is a type of financing for businesses. It allows business owners to secure funding until the long-term loan can be made available. It can be used to cover operational costs and also for working capital needs temporarily. Bridge loans are typically unsecured loans which means that the borrower will not need to pledge collateral to secure the loan.
If you’re considering bridge financing for your business until your long-term business loan is secured, this article will help you understand all you need to know about bridge financing.
What is Bridge Financing
Bridge financing is a type of short-term financing that allows a business to borrow money until they can obtain a longer-term loan from a bank or other private money lender. It can be used to bridge the gap between the time the long-term loan is made available and the time for which the business needs the capital to start operating effectively.
How Does it Work?
Applying for bridge financing can be a complex process. The lender will review the equity in the business, credit scores, reliability, and other factors to determine whether or not the business is a good fit for the bridge loan. This type of business financing loan has a term of about six months to a year, depending on the amount of financing being provided.
Pros and Cons
Pros:
Quick Financing
The application process can be relatively quick, with most lenders processing loans within a matter of days. There are no hidden fees associated with applying for a bridge loan.
Less Expensive
Bridge loans tend to be more affordable than bank loans.
Flexible Payback
Some bridge loans come with flexible terms and conditions. This means that the repayment of the loan can be made in monthly installments over one year.
Cons
High-Interest Rates
Bridge loans tend to come with a higher interest rate and other fees than bank loans.
Difficult to Qualify for
Bridge loans tend to have more stringent requirements for approval than other business loans. There are also fewer lenders that offer this type of financing, so competition is fierce.
At Whitestone Fund, we help business owners get business loans in NYC for flexible terms and according to their business needs. We also offer merchant cash advances and NYC small business loans. Click here to connect with a representative or get started today!
