Sometimes in business or life, you need a quick, temporary infusion of cash. Whether you know you have cash coming in soon or need capital to fund a profitable venture, a bridge loan can help. Backed by the equity in a property you own, a bridge loan allows you to get fast cash, and unlike a traditional loan, it doesn’t depend on your financial history. Here are some examples of bridge loan use cases to consider.
When cash flow is tight, it can be difficult to make ends meet. If you need a few weeks or months to collect payments from customers, but payroll has to be processed before then, you need a quick solution. A bridge loan can help you cover the gap when receivables are high and you don’t have the cash in hand to pay employees.
This bridge loan use case is especially relevant for businesses that have been negatively impacted by COVID-19. If you expect revenue to bounce back and want or need to keep employees while cash flow has stalled out, a bridge loan could be the solution.
If not having enough cash is holding you back from starting a new business that will generate income, consider a bridge loan. Use the cash to secure office or production space, purchase equipment and supplies, and hire employees. The revenue generated by the business can be used to pay the loan back at the end of the term, which is usually 6-24 months.
Expanding an existing product line requires capital, especially if you must purchase new equipment or inventory. A bridge loan can help you cover these expenses in addition to hiring new employees, doing a marketing push, and whatever associated costs come with the launch.
If you have a business partner that is ready to retire or move on, you can use a bridge loan to buy them out up front, rather than creating a payment schedule. After you and your partner have decided on the amount and terms, use the equity in the property you own to secure a bridge loan to secure a lump sum. This approach allows you to make a fresh start with your new business structure.
If a bridge loan is coming due and your lender is not willing to extend terms, you can use another bridge loan to pay it off. Many people are finding themselves in the position of being unable to pay the lump sum of back interest after several months of COVID-19 payment deferrals. If you’ve been unsuccessful with refinancing an existing bridge loan with a bank lender and need additional time, a hard money bridge loan might be the answer.
If you find a commercial property with great potential, you probably can’t get a traditional loan to pay for the purchase and/or improvement costs. This is because traditional banks require the property to be generating income. With a bridge loan, you can purchase the property and improve it so it’s suitable for renters. When you’re ready, you can convert the loan to a more traditional mortgage or pay it off if you have the cash.
Whether you’re trying to fill a gap that COVID-19 has created or taking advantage of a new business opportunity, a bridge loan through Socotra Capital provides you with the fast cash you need. If you have equity, you could qualify for a hard money loan, even if you haven’t been able to make recent loan payments due to COVID-19.
If any of these bridge loan use cases resonate with you, learn more about them in our Borrower’s Guide to Process, Preparedness and Timeline.