A bridge loan is a type of short-term loan designed to bridge the gap between two longer-term financing loans. Businesses use bridge loans to cover capital shortages that may occur when the business must repay one loan before it has time to acquire a new long-term business loan.
Bridge loans have a variety of purposes with the most common types being operating capital and mortgage bridge loans. These types of loans are also easier for small businesses to qualify for and obtain, unlike a traditional long-term business loan, which can have months of paperwork.
Typically, bridge loans are good for a three month period, but can extend up to 24 months. Most bridge loans can be funded within 24 hours, allowing the small business access to immediate capital.
Another benefit of a business bridge loan is that the company can usually pay off a bridge loan at any time without incurring a prepayment penalty.
A bridge loan can be a practical solution when additional capital is needed suddenly, and waiting for traditional financing is just not an option. For example, a small business owner may have an investment opportunity, but needs to act quickly in order to capitalize on it. With a bridge loan, the business owner can get the cash they need within days, providing them the funds to invest.
See how Bizfi can help your small business secure short-term financing.