Should I Use Bridging Finance To Grow My Business?

If you’re thinking about using bridging finance to grow your business, there are a few things you should consider. You may need to take even more drastic action if your business is stagnating. Bridging finance can be a helpful tool, but it also comes with its own set of pros and cons.

Bridging allows you to access capital or funding very quickly and you must always use something as security, such as your inventory, residential or commercial property. 

The reason for using this over a traditional personal loan is because the terms are flexible and they can be obtained by people with bad credit due to using collateral and the more open-minded nature of lenders. Some see bridging as one of the many alternative funding options for startups, although it is important to understand the risks.

Whilst bridging is mostly used by those in property, it has also been used by a number of airlines and manufacturing companies too.

The Pros

First, let’s talk about the pros. Bridging finance can provide you with quick access to funds when you need them most. This can be especially useful if you have a time-sensitive opportunity to expand your business, such as purchasing inventory at a discounted price or investing in new equipment. Bridging loans can be available in 2 to 4 weeks (Source: MT Finance) depending on the complexity of the case and this can be very useful to meeting tight deadlines.

Additionally, bridging finance is relatively flexible compared to traditional loans. You can often tailor the terms to meet your specific needs, whether that means choosing a shorter repayment period or securing the loan against specific assets.The rates are not the cheapest, but because you are using security, they can be cheaper than credit cards and other types of personal loans.

Another benefit of bridging finance is that it’s often easier to qualify for than other types of financing. This can be particularly advantageous if you have a less-than-perfect credit history or if you’re a newer business without a long track record of success.

The Cons

Now, let’s discuss the cons of using bridging finance. One major downside is that it can be more expensive than other forms of financing. Because bridging loans are designed to be short-term solutions, they typically come with higher interest rates and fees.

Additionally, there’s always a risk involved with using bridging finance. If you’re unable to repay the loan on time, you could end up losing the assets you used as collateral. This can be especially concerning if you’re using bridging finance to fund a high-risk venture or if you’re already operating on tight profit margins.

Another potential drawback is that bridging finance is not always suitable for long-term financing needs. If you’re looking to borrow money for an extended period of time, you may be better off exploring other options, such as traditional bank loans or lines of credit.

In conclusion, whether or not you should use bridging finance to grow your business depends on your specific circumstances and financial goals. 

It can be a useful tool for accessing quick funds and taking advantage of time-sensitive opportunities, but it’s important to weigh the pros and cons carefully before making a decision. If you decide to move forward with bridging finance, be sure to shop around for the best rates and terms, and make sure you have a solid plan in place for repaying the loan on time.