What is a Bridge Loan?
A Bridge Loan is a short-term loan usually used to finance capital deficits, which might occur while the company is repaying one loan before it is approved for a new long-term loan. Bridge Loans act as a bridge for closing the gap between two long-term borrowings. Such loans can be used for different purposes, most commonly for bridging operating capital shortfalls and mortgage payments. It is easier for a company to qualify for a bridge loan rather than a traditional long-term loan from a bank. At Baron Finance, we understand the need and purposes of bridge loans and we customize to suit your business requirements. You can also pay off your Bridge Loan at earlier without incurring a prepayment penalty.
Bridge Loans provide the boost for moving new product or service idea from conception to sales without any delay. Your existing business assets secure the Bridge Loan, netting you valuable time to capture market share and customer loyalty while your competitors are still looking for financial support.
Bridge Loans have flexible terms and can be paid off either before permanent financing has been secured or after. In the first instance, the borrower will fully repay the loan over a fixed time period. Avoiding late payments will improve credit rating significantly, thereby improving credit ratings for long-term loans. In the second case, Bridge Loans will be repaid in full by part of the permanent funding.
One of the main advantages of bridge loans is that they are strictly short-term. A traditional bank loan, usually has to be repaid over a fixed and sometimes long period. It might even bring with it an additional financial hardship. Bridge Loans, however, are designed to be repaid in full before long-term financing might even have been secured at a bank.