Ensure Short-Term Liquidity with Bridge Financing
Posted: Aug 21, 2018
You don’t only need a great business idea to start your company but sufficient capital too. Finance is the backbone of every business. Without it, it will be very difficult for you to survive in today’s highly competitive market. Now, when you are raising money for your business, you generally come across two options- long-term loans and short-term loans. For startups at their early stages, short-term loans become very significant as they allow them to meet their short-term liquidity requirements. Bridge loans are one such type.
What is Bridge Financing?
As the name itself suggests, bridge financing acts as a "bridge" between old and new mortgages. It is a short-term loan and an interim financing option meant forfirms, companies and other businessentities that want to solidify their current positions in the market until they are able to arrange a long-term financing option. In simple words, bridge loans allow users to meet their current obligations by providing immediate cash flow.
The facility is usually offered by investment banks and venture capital companies in the form of a loan or equity investment. If your company's capital is shorter than the future financing options, bridge loan in Asheville, NC can help you in remaining solvent.
Features of Bridge Loans
- Ideal for existing commercial as well as non-owner occupied residential property.
- The loan typically has a duration of 6 to 12 months but in some cases, the term can also extend up to 3 years.
- The interest rate is usually 2% above current prime rates.
- You should have at least 20% equity in the collateral property.
- Bridge loans do not have prepayment penalties.
If we talk about the importance of bridge financing in real estate it can be pretty beneficial. For those who are trying to sell their homes or property in a slow market, finding a buyer is not easy. Bridge loans can be a good option in such a situation.
Benefits of Bridge Loans in Real Estate
- You can immediately put your home on sale and buy without restrictions.
- You are not required to pay monthly payments for a few months.
- There are no contingencies to sell if someone has made a contingent offer to buy. You can move forward with the purchase of property even if the seller issues a notice to perform.
Looking for short-term liquidity in business or real estate? Consider bridge financing!
The author is an avid writer. The article is about bridge loan.