Bridging loans are short term loans that can provide temporary cash. Many businesses are using bridging loans to solve temporary cash flow problems.
A typical scenario when a bridging loan is needed is when a creditor delays payment of a large sum. The business knows that the money will be paid, but until it arrives, they still need to cover their overheads such as staff wages and supplier payments.
Another case is when high demand goods become available at a low price, but can only be purchased in very large quantities. A bridging loan can finance the purchase of inventory and be repaid when the stock is resold at a profit.
Some businesses may be offered a large contract, but they need cash up front to fund the operation. For example, a restaurant may be offered the catering contract for a large event. Before the event organiser pays the restaurant, extra serving staff needs to be paid, and ingredients have to be purchased. A bridging loan can cover all the expenses until the account is paid.
If a business has not traded for a long time, it may find it difficult to get a standard bank loan due to a short credit history. According to the entrepreneurial website, growthbusiness.co.uk, a short term loan will not only solve cash flow issues, but can also help build a positive credit history when repaid on time and in full.
A broker is the best source for finding a bridging loan to match the needs of a business.