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Home Finance Bridge Loans – Short-Term Financing for Individuals and Businesses

Bridge Loans – Short-Term Financing for Individuals and Businesses

A bridge loan can secure operational expenses while waiting for the actual funding. The arrangement is subject to high interest rates and requires a collateral.


Bridge Loans - Addressing Immediate Financial Responsibility

Companies and individuals who need to address an immediate financial responsibility can consider the convenience of bridge loans. The short term arrangement allows instant cash flow. Most bridge loans need to be backed up by collaterals like product inventory or real estate asset. The loans can run for a few months with exceptionally high interest rates. The arrangement is perfect for individuals and organization waiting for a cash windfall in a matter of months, but somehow need to address an existing obligation. Companies can secure the loan if they are expecting equity financing while homeowners can use the loan to pay for a new house while waiting for a buyer for their old home.

Bridge Financing - Short Term Loan with High Interest

Business owners awaiting the arrival of funds can maintain stability with bridge financing. A short term arrangement, this is usually granted to borrowers expecting the approval of long term loan in a matter of weeks or months. Individuals or business borrowers are required to present evidence of the ability to repay the loan. Like a bridge, it seeks to join the available financial resources with the anticipated funds. Bridge financing allows the transaction or business operations to go on, while waiting for the loan release. This is often used for real estate transactions or for day-to-day business operations. The loan actually gives borrowers more time to stabilize their finances.

Bridge Funding - Securing Operational Expenses

Companies anticipating funds address their financial responsibilities through bridge funding. Most banks assist companies with short-term loans when the need arises. This assures the smooth flow of business, without the hassles of securing funds. However loans made for bridge funding purposes are subject to high interest rates, collaterals also need to be presented. If the borrower is not careful this of arrangement can be very risky. In fact it should only be done when borrowers are absolutely sure about the coming funds. These arrangements can also pose a red flag to investors because it simply an indicates that the business is going though financial challenges.

Written by Nelly Kendrick

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