A Bridge to The Future For Small Businesses
- 26th November 2018
- Posted by: Loanable
- Category: Resources
One thing that is important for businesses, be they large or small, is maintaining their cash flow, cash coming in against cash going out.
For some smaller businesses, this can be literally a matter of staying in business or closing one’s doors.
Cash comes into a company in many forms, usually through sales, or if you are a supplier to another company, money can come in through invoicing, or billing other people and companies for your products or services.
You constantly need sales and invoices being sent out as the monthly expenses to operate a company never cease.
There is always rent/mortgages to pay each month, wages, taxes, electricity, phones, etc, the list can be quite a long one.
Some companies have seasonal periods, they earn the bulk of their profits during certain times of the year. It may be at Christmas time such as for some retail firms, or in the summer for some companies in resort areas.
Agriculture and tourism, while they can be profitable businesses, can also be seasonal.
So how can a business meet a cash flow problem should one arise?
The first way that springs to most business manager’s minds is to get a business loan, borrow some money to carry you through. And the various types of loans available to a business are many, it just depends on the company, what assets they may have, and also their profitability.
One way is to use the outstanding and future invoices a company be to receive, to get cash now, and not have to wait to be paid. This is called Invoice Financing.
A lender will lend the company a percentage of the amount of outstanding invoices they have, which provides the company immediate cash, and then either the company can chase up the invoices to repay the loan, or the lender can do this or assign it to a third party.
Either way, the company gets an injection of much needed cash.
Then there are other ways for a company to fill a short-term cash flow problem, especially if they are rich in assets, such as property.
Bridging Loans to Solve Cash Flow
Bridging loans are a way for a business with assets, such as property, to borrow against those assets, for a short-term loan to increase cash flow.
For many businesses the issue of having a cash flow problem is short-term, and can be cured in a few weeks or months. Bridging loans can help.
The loans themselves are based on equity the business may have in a property, and are “interest-only” loans.
The company uses the equity in a property to receive a loan and have the cash they need. The loan is then paid back in full with interest within a short period of time.
Cash flow problem solved.
For a business with a long-term cash flow issue, a bridging may not be the best solution.
Bridging Loans For Purchases
Suppose your company is looking to grow, you need a larger warehouse, office space, depot, and have found the perfect location, but you need to act quickly and arrange financing.
A bridging loan can help with this as well.
The company can use their existing property and equity, to get the financing on the new property, paying off the bridge loan once long-term financing has been secured.
No need to miss out or slow down the company’s growth.
Bridging loans are a way and alternative for a business to solve cash flow issues, and also buy stock, equipment, and property, quickly without losing out.