Bridge loans offer small business owners countless opportunities for company growth. That said, to maximize the benefits and keep interest payments low, it’s important to know how you’re going to use the money before you sign on the dotted line. Having a clear idea going into this type of loan ensures you get the funding you need and keep costs to a minimum. Follow these tips for greater success.
Don’t Be Afraid of Bridge Loans
The first tip is to take advantage of opportunities that appear. Don’t allow fear of financing to hold you back. True, bridge loans have higher interest rates than traditional bank loans, but that doesn’t make them bad. If anything, the amazing flexibility, easy qualification process, and fast approval are huge benefits for small business owners.
What type of opportunities can bridge loans help with? It depends on your industry. For manufacturers, a bridge loan can provide the funding to purchase a large volume of raw materials. If the company was hesitant to take on a new client because of not having enough product, this type of financing can eliminate the obstacles and provide the opportunity to generate a lot of revenue.
The same thing applies to B2B companies, such as authorized distributors, wholesalers, and sales businesses. Trying to keep inventory levels down can hamper financial growth because customers may prefer to simply cancel orders rather than deal with backorders when products are out of stock. True, you don’t want a huge amount of excess inventory, but you should be flexible to always deliver orders on time to your clients.
Bridge loans can also help your business save money. By purchasing inventory in bulk, it’s often possible to qualify for ordering tiers that net your business large product discounts. For an order of $10,000, an additional 5–10% discount represents a whopping $500–$1,000 saved!
Be Open About Your Business Needs
Bridge loans are provided by alternative lenders. This means that terms are far more flexible than with traditional loans. If certain terms seem like they would be restricting for your business, you don’t have to simply accept them. It’s often possible for the lending company to tweak terms to make the loan a better fit for your business.
Sometimes, purchase order financing or invoice financing is exactly what you need. Find the right options that support healthy business growth without putting unnecessary stress on your operations.