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What Is a Business Bridge Loan?
A business bridge loan is a versatile short-term financing tool used to help small business owners and large companies to cover urgent expenses until longer-term funding or revenue can fill the void.
Unlike SBA loans or conventional bank financing, which can take weeks, if not months, to fund, bridge loans are known for their quick funding, flexible terms, and easy accessibility.
Entrepreneurs and business owners who need quick access to capital often turn to these loans for economic relief or to make a purchase or acquisition.
When to Use a Business Bridge Loan
Business bridge loans are most commonly used when timing is critical.
If your company is facing a temporary cash crunch or you have identified a business to take over or to roll up into your existing operation, a business bridge loan could be an ideal solution for you.
Bridge Loan for Business Acquisition
- Avoid losing out on an attractive deal: Perform faster than competitors when a lucrative opportunity presents itself.
- Submit a strong bid: Offers using bridge loans are all-cash offers, appealing to sellers' needs, since SBA or bank approval is not necessary, and funding is not delayed or denied.
- Seamless transition: Cover the acquisition with a business bridge loan until permanent long-term financing is obtained
Bridge Loans for Small Business Working Capital
- Operating expenses: Cover fixed costs such as payroll, rent, inventory, and utilities with no downtime.
- Initiate growth: Increase budget for marketing campaigns, new employees, or seasonal inventory needs.
- Buy in bulk: Purchase a higher volume of inventory at a discount.
- Bridge funding gaps: Keep business operational while pending accounts receivables and other payments are finalized.
Bridging Loans for Business Expansion Opportunities
- Prime real estate: Acquire prime commercial real estate on short notice.
- Access to capital: Tap into the equity in your property to facilitate other business opportunities.
- Open new locations quickly: without waiting months for bank financing approval.
How Business Bridge Loans Work
Pre-Approval Process
Contact a bridge lender, provide them with basic information about your property and your business’s financial situation. Usually, within 5-10 minutes, you will be pre-approved or denied.
Value of the Asset
An appraisal company, a broker's price opinion (BPO), or recent comparable sales in the area will be used to determine the value of your collateral property.
Current condition, occupancy rates, and long-term rental contracts will be examined.
Terms
Bridge loans for businesses are usually interest-only payments, with a loan duration of 6 to 24 months is most common. Bridge loan lenders are cautious about protecting themselves from a time perspective due to fluctuations in the economy.
Loan extensions might be possible, ask before agreeing to the deal.
Closing
After approval, funds are released to escrow and then disbursed to the buyer in accordance with the agreed-upon terms.
This process only takes a few days.
Exit Strategy
Lenders funding business bridge loans will want to know how they will be repaid before funding the loan.
Common repayment methods include selling the property, refinancing, or paying off the debt with cash-flow from the business.
SBA vs Bridge Loans
SBA loans might be the most well-known financing option for buying a business, but in reality, these loans are rarely used due to their lengthy approval process, the vast amount of paperwork, and the need for personal guarantees, which can be very risky.
Business bridge loans, conversely, are much more straightforward and easier to fund.
SBA Loans
1 to 3 months, or longer
Requires strong personal & business credit
Usually required, but flexible
10% to 20%
Low to moderate (5% to 9%)
5 to 25 years
Comprehensive: tax returns, bank statements, business strategy, etc.
Moderate
Buying a business, equipment, or expansions
Bridge Loans
1 to 3 days
Less critical, more focused on collateral
Property or business assets
25% to 40%
Moderate to higher (8% to 15%)
6 to 24 months
Minimal: appraisal, basic info, purchase contract, and exit strategy, etc.
High, great for unconventional deals
Quick property or business acquisitions
Business Bridge Loan Lenders
Crescent Lenders are top-rated California bridge lenders, providing bridge loans to businesses all across the region.
Whether you need a bridge loan for a residential fix and flip in San Diego or are looking to purchase a commercial property for your business in Los Angeles, we have the expertise and capital to make it happen.
With over 150 million in bridge loans funded and over 2 decades of experience, we know how to deliver.
Handpicked Resources
Bridge Loans Guide Bridge Loans
Commercial Bridge Loans Bridge Loans
How Long Does a Bridge Loan Take? Bridge Loans
Multifamily Bridge Loans Bridge Loans
Bridge Loan Rates & Fees Bridge Loans
For Real Estate Investors
About the Author
Russell Barneson Hard Money Lending
Russell is a seasoned real estate investor, writer, and hard money lending strategist, as well as the co-founder of Crescent Lenders. He holds a degree from the University of Southern California’s Marshall School of Business. Outside of work, Russell enjoys surfing and spending time outdoors with his dog, Amy.