Business Finance to Solve your short term cash deficit
Running a business is not easy. There are several challenges like cash flow deficit, operational hurdles and many other problems. Cash flow deficits can cause severe impairment and cause challenges in keeping the business afloat. A Bridging loan is the perfect solution for cash flow problems. Bridging loans are usually short term loans that are granted for a period of 1 to 12 months. The purpose of a bridging loan is to provide short term financial assistance to a business on certain set of terms and conditions. It can also be used to quickly settle on a property also. It is extremely helpful for business owners when they are facing a cash shortage and are looking for short to medium term financial solutions. A bridging loan can fill the interim gap and ensure that the business runs smoothly. Other examples are when a business owner wants to take advantage of prevailing low prices or buy a property when property rates have fallen.
Bridging loans can be provided to businesses against real estate security. The collateral is a fixed asset of either residential, commercial or industrial property. Since the funds are provided by private companies or individuals, the processing time is very quick. Once the application documents are submitted, you can expect the loan to be disbursed within a timeframe of 2-3 days. On some occasions the processing times can be as less as 24 hours. The loans are generally in the range of $25000 to $5 million depending on the size of the business and the funding requirement. As the risk profile of a bridging loan is high, the interest charged on the loan is also higher compared to traditional bank finance. The rate of interest charged is usually between 1% and 2% per month.
A bridging loan comes with various terms and conditions. It is mainly used for the purpose of business finance and it is advisable to clear the loan as soon as your cash flow stabilizes or you are able to realize your pending receivables. This helps the business to retain cash that would otherwise go on interest payments. Since banks are wary of providing short term loans to business, private funds can be good option. They are mostly provided by lending professionals who have many years of experience in the business. A bridging loan can help to reduce the stress of cash flow issues and help the business owner to focus on operating the business efficiently. It is better to opt for a fixed term bridged loan that has a revolving credit line. It will act as a flag for the business owner and act as a reminder to clear the loan within that date. A revolving credit loan on the other hand can be too tempting and does not have an end date so it can be extended for any duration. The interest payment will be a burden on the company’s finance and affect the bottomline. Bridging loans help many small and medium sized Australian businesses to tide over financial hardships. A business owner can look at business finance from a private fund or individual if long term funding arrangements are being delayed by a lengthy process. Bridging loans provide small businesses with the ammunition to stay competitive.