Financing energy infrastructure
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Bridge Financing
The business loan for a market opportunity
Also known as interim financing, gap financing, or swing loans, bridge loans bridge the gap during times when company financing is needed but not yet available. This is the right business loan between two transactions to take advantage of an opportunity on the market.
Bridge loan is a short-term loan that allows you to obtain a partial advance on the amount of the sale of an asset, allowing you to meet current obligations by providing immediate cash flow. Imagine that you are waiting for the sale of an asset such as a building or a machine to finance another project that cannot wait. The bridging loan can be essential for the development of your new project, while waiting for the infusion of funds later.
Bridge loans also pop up in the real estate industry, imagine if you have spotted a rare property, which may not remain available on the market for long.
Consequently, the bridging loan will make it possible to finance this purchase, while waiting for the sale of your other properties.
Advantages:
Short-term solution: One of the biggest advantages of a bridge loan is that it’s only available over a short-term period. Whereas long-term financing products like a mortgage encourage long-term expenditure, bridging loans can renewed and arranged from as little as 6 to 36 months.
Improving you credit profile: Your credit score can be significantly improved if you take out a short-term loan and make all the repayments on time. This will help any applications you make for financing in the future, as the lower your credit score is, the less likely you are to be approved.
Flexible repayment: Although a closed bridge loan has a fixed repayment date, there’s nothing to stop you paying back the loan before then and saving on the interest rates, as sometimes no prepayment penalties apply.
In summary:
The bridging loan has some important strengths, and it becomes essential if you find yourself in a situation between two transactions where the time factor is against you, though if you feel uncertain to decide – contact our expert for advice.
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