Small Business Bridging Finance: Unlock Growth

By: Aaron Robbins0 comments

In Australia, small businesses play a vital role in driving the economy forward. However, they often face challenges when it comes to accessing the necessary funds to fuel their own growth. This is where small business bridging finance comes into the picture.

Bridging finance provides a short-term solution to bridge the gap between the need for immediate capital and the availability of more permanent funding sources. In this article, we will explore how small businesses in Australia can leverage bridging finance to unlock their growth potential.

Understanding bridging finance for small businesses

Small business bridging finance refers to short-term funding options that help businesses address temporary cash flow challenges or seize growth opportunities. It acts as a financial bridge to meet immediate needs, such as funding inventory, managing payroll, upgrading equipment, or taking advantage of time-sensitive business prospects. Bridging finance is typically repaid once the more permanent funding source becomes available, which is why they’re a short term-finance solution.

How do bridging loans work?

Typically, bridging loans are secured by either a residential property or commercial property owned by the applicant. When using bridging loans to purchase property, they either take over any existing mortgage and then repay the peak debt down once the existing property is sold. However, you may be wondering ‘well how does a bridging loan work if I’m not buying a new property?’ Bridge loans actually refer to a range of loan products that enable you to access fast funding until you can access more permanent business finance.

Being short-term finance, the lender needs to see that there is a viable exit strategy to repay the bridge loan. This makes them a relatively high-risk loan type, meaning that business owners may need to approach private lenders to access bridge finance.

Do I need to have a strong credit history to access a bridge loan?

The lending criteria imposed by mainstream and traditional lenders (such as big banks and credit unions) tend to ostracise small business owners due to their limited trading history. However, using private lenders means that borrowers can avoid the stringent lending criteria and work with the lender to devise an appropriate strategy for repaying the bridge loan.

Loan terms

Bridging loans are a short-term loan, ranging from one month up to twelve months. The loan period will depend on the borrower’s unique financial situation and their exit strategy.

How much can I borrow under a small business bridge loan?

Your bridge loan amount will depend on the property value of your security property, how much equity you hold in the property and of course, how much you need to borrow for your bridging loan!

What is the interest rate on a small business bridging loan?

Most bridging loans are repaid on interest payments until the full loan amount is repaid at the end. The interest rate applicable will differ, given the strength of the application. Most small businesses are concerned with their creditworthiness, given that many small businesses in Australia experience volatility in cash flows in the first few years of trading.

Benefits of using small business bridging loans

We take a look at some of the main benefits for Aussie small businesses to use bridging loans:

Quick access to funds

One of the most significant advantages of bridging finance is its speed. Traditional lending processes can be time-consuming, while private bridging finance providers often offer faster approvals and access to funds, allowing small businesses to seize growth opportunities promptly.

Flexible repayment terms

Small business bridging finance offers flexibility in terms of repayment. It allows businesses to repay the loan once they secure permanent financing, ensuring that the repayment structure aligns with their cash flow.

Overcoming cash flow gaps

Small businesses often face seasonal fluctuations or delays in customer payments that can create cash flow gaps. Bridging finance can bridge these gaps, ensuring that day-to-day operations continue smoothly and growth plans are not hindered.

Seizing opportunities

Growth opportunities sometimes arise unexpectedly and require immediate funding. With bridging finance, small businesses can swiftly respond to such opportunities, whether it’s expanding into new markets, launching marketing campaigns, or investing in new technology.

Available even with bad credit

If you have bad credit, then you may hold additional concerns around how much interest you’ll likely be charged, or whether you’re eligible for small business bridge loans. Diverse Funding Solutions has some of the most competitive interest rates in the private lending market, which makes us a great choice for small businesses with bad credit who are seeking business finance.

How to utilise a small business bridging loan

Here are our tips on how to utilise a small business bridge loan:

Identify the purpose

Clearly define the purpose for which you require bridging finance. Whether it’s to fund expansion plans, take advantage of a lucrative contract, or address a temporary cash-flow gap, having a specific goal in mind will help you communicate your needs to potential lenders.

Research and compare lenders

Explore reputable bridging finance providers that specialise in small business lending. Compare interest rates, repayment terms, fees, and eligibility criteria to find a lender that aligns with your requirements.

As one of Australia’s fastest-growing private funding brokers, Diverse Funding Solutions has access to over 200 of Australia’s top private lenders, giving you the ultimate choice and guidance to find the most appropriate lender for your bridge finance needs.

Prepare documentation

Gather the necessary financial documents, such as cash flow statements, balance sheets, and business plans, to demonstrate your business’s financial stability and growth potential. This information will help lenders assess your creditworthiness and make a more informed decision.

Get the best bridging loan for your small business

You don’t need to be a budding property developer to unlock your growth potential by using a bridge loan. Small business bridging finance can be a valuable tool for many Australian small businesses — it provides quick access to funds, flexible repayment terms, and helps overcome cash flow gaps or seize time-sensitive opportunities.

Get a free quote or talk more with the team at Diverse Funding Solutions about how you can use bridging finance to fuel your growth and achieve your entrepreneurial aspirations in the dynamic Australian business landscape.

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