You know the adage, “time is money.” Well, time spent waiting for money from the bank will cost you money. You might have heard the term “bridge loan” in reference to residential real estate, but these loans can help everyday business owners as well.
Bridge financing allows business owners to move quickly on time-sensitive deals. You might find a fantastic opportunity to expand your business or buy some inventory at a discount. You might need financing as fast as possible, but a bank won’t share your sense of urgency.
Months might go by before you can secure a business loan. While waiting on the bank, the opportunity might disappear entirely. With bridge financing, this isn’t the case, and the process is pretty simple:
1. Get a loan
2. Capture the opportunity
3. Refinance to a long-term loan or use your profits to pay back the initial loan.
Bridge financing gives you as a business owner the freedom to invest without being held hostage by the tedium of the bank application process.
• Bridge to refinancing: Say you own a clothing business. A fashionable storefront has opened up in the posh section of town. Lately, your sales have lagged, your margins are thin, and you have little to nothing in savings. You know if you moved to the new location, sales would increase, and the move might save your business.
But, your lagging sales prevent the bank from giving you a second mortgage on the new property, which is already generating a lot of interest from other buyers. What can you do?
You take on bridge financing, which allows you to make a full offer on the competitive property. You secure the luxuriant storefront, and your assumptions prove correct. Increased foot traffic results in a massive uptick in sales. The loan officer at the bank admires your increased profits, and you can now refinance to a long-term conventional loan.
• Bridge to profits: You might be in the furniture business, and your competitor might be liquidating a warehouse full of sleek Italian furniture. They are selling it off at a steep 75 percent discount. Seeing the margins, you decide you want to buy the whole lot, but you don’t exactly have the money to do this.
Using bridge financing, you buy up every item in the warehouse. The designer furniture gets a considerable markup, and it sells quickly to your target customers. You pay off the bridge financing with the increased profits and earn tidy sum yourself.
Looking at the examples above, you can see how bridge financing might benefit you as a business owner.
If you waited on a conventional bank loan in the above situations, you simply would have missed out. You might have gone out of business waiting to get approved for a second mortgage, or you would have never earned a generous return on inventory purchased at a discount.
If you encounter a business prospect that is a sure-fire bet but you need capital right away, opt for bridge financing instead. Time is money, and time spent waiting on a bank loan might cost you the opportunity to make money.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.