Businesses that experience temporary cash flow problems can benefit from taking out a short-term bridging loan, and there are examples big and small of this taking place.
U.S. TV station WBRZ reported in July 2016 that the state of Louisiana announced that it may have to take out a short-term bridging loan to pay its bills until tax revenue and other fees are paid. WRBZ said that arranging cash flow bridging loans is common practice in American states, and is increasingly being used by British businesses.
Cash flow bridging loans, sometimes called working capital loans, can be as small as £1,000, or as large as £50,000 and above. They are available for small businesses as well as sole traders. The main requirement from the lender is for the borrower to have a clear exit strategy that includes the date the loan is repaid, and knowing that the funds to repay it will be available.
A typical situation is a business that has a seasonal slump in sales but knows that its cash flow will increase after a set period.
A business may have to purchase tools, materials and equipment for a job that they will not be paid for until it is finished. A bridging loan could finance this.
Sometimes, a business comes across a high-demand product offered at a large discount for bulk buying. A bridging loan can finance this purchase, with the loan repaid form the profit made on selling the stock.
For businesses that find themselves in any of these positions, a bridging loan broker can be used to find the best deals.