How to Use Bridging Finance for Your Business

Bridging finance, also known as a bridging loan or bridge loan, is a short-term loan used to bridge a temporary gap in financing. It is typically used to facilitate property transactions or meet urgent financial needs in business or personal scenarios in which there is insufficient time to use traditional forms of financing such as business loans.

£278.8M was lent in bridging finance in Q1 of 2022. If you are interested in using bridging finance for your business, it is important to make some key considerations and proceed well-informed. This article aims to explain the concept of bridging finance and how it can provide quick access to funds for your business. 

What Is Bridging Finance?

Bridging finance is a valuable tool when you require immediate access to funds for property purchases or capital infusion into your business. Unlike traditional lending avenues, bridging finance offers a faster and more flexible approach to securing short-term funding, designed to tide you over for a few weeks or months. 

This type of loan can support businesses looking to finance:

• Marketing campaigns
• Expansion plans
• Recruitment drive
• Cash flow management
• Filling seasonal or cyclical demands
• Refinancing or debt consolidation

Many sectors use bridging loans including airlines, factories, and other industries who use or deal with valuable assets.

Why is Bridging Finance Important For Property Developers?

Bridging finance is particularly useful for property developers who require quick access to capital for their projects. Traditional property purchase processes often involve lengthy chains and time-consuming procedures. Bridging finance allows developers to bypass these constraints, enabling them to secure the required funds promptly. 

When purchasing properties at auctions, quick completion is essential. Bridging finance provides the necessary funds to complete the transaction within the specified timeframe. Unlike a traditional mortgage where only a deposit is needed, homes sold on auction need to be paid for in full. Most people do not have this money at hand, so bridging loans can fill the gap until the home is flipped and resold. 

How Can Bridging Finance Be Used to Make Big Purchases?

Bridging finance is not solely restricted to property-related ventures. It can also help businesses to make big, timely purchases in various industries. One major example is manufacturing equipment. 

Manufacturers may need to acquire machinery or upgrade existing equipment to meet demand or enhance efficiency. Bridging finance allows businesses to quickly obtain the necessary funds, ensuring timely procurement and minimising disruption to operations. 

The loan can be used to purchase equipment, expensive machinery, manufacturing equipment, or technology infrastructure.

Bridging loans can also be used to bulk-buy stock. Retailers or e-commerce businesses may face time-sensitive opportunities to purchase bulk inventory at discounted rates. Bridging finance enables them to capitalise on these opportunities, giving them a competitive edge and helping their profit margins.

Funds from bridging loans can support business expansion plans, such as opening new branches or acquiring additional locations. They can also help cover the costs of renovating or refurbishing business premises to enhance the customer experience or accommodate business growth.