A bridge loan used for business purposes is a temporary financing facility that provides short-term funding until a permanent is in place, or until a commercial debt obligation is removed. Bridge loans range between 1-12 months with either a single repayment often (but not always) provided at the end of the term, or a serious of daily, weekly or monthly payments. Rates for this type of financing are usually in the 8-20% range but can be higher depending on the type of bridge loan, or bridge funding facility.
Bridge financing is typically used for working capital purposes, operating capital while waiting for permanent SBA financing, debt repayment, purchasing of commercial real estate and/or development of commercial real estate, but may have more specific purposes like paying a vendor, making company payroll, making a tax lien payment or completely paying-off a tax lien, accounts payable needs, purchasing inventory, or waiting to clear a purchase order.
A bridge loan usually funds faster than more traditional financing — which makes it appealing to businesses that are waiting for more traditional financing to come available. But with speed in funding comes increased risk for the lender, therefore bridge financing is generally much more expensive than more traditional types of business term loans and lines of credit.
Interest Rates: 8-20%
Terms: 1-12 months
Funding amounts: $5,000 – $10,000,000
Time to fund: 3-10 days
Repayments: Single balloon payment, monthly, daily & weekly
Collateral required: Usually
Time in Business: 6 months or more
Existing loans OK: Yes
Tax Liens Acceptable: Varies
Industries Funded: All
May require appraisals