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Every family-run business will eventually reach a point where they have to make a bold decision that unlocks growth, whether that’s securing a property that can help your business to grow, managing a temporary cash-flow gap, or acting quickly on an opportunity that may not be around forever. At Goldhill Finance Limited, we know that bridging finance can be an incredibly useful tool for SMEs.
What is bridging finance and why it matters for family businesses
Bridging finance is short-term funding secured against property or land that will provide your business with fast access to capital when traditional lending timelines are simply too slow to rely on. Bridging loans have been designed to “bridge” the gap between an immediate need of your business and the longer-term funding or a planned sale has been completed.
For family-run businesses, this can be a lifeline in scenarios like:
- Securing new premises or investment properties before any form of long-term finance can be arranged
- Covering short-term working capital shortfalls while awaiting receivables
- Purchasing stock or equipment in a quickly manner so that you can fulfil a major order
- Completing a time-sensitive property acquisition, such as purchasing a property at auction
- Seizing a strategic opportunity that requires quick action so that you don’t miss out
As a bridging loan can be arranged far faster than traditional business finance, often with decisions in hours and completions in as little as 48, they can be especially useful when speed is the most important factor.
Using bridging finance responsibly
No matter how useful a bridging loan may be to your business it is not a long-term financing solution, and they come with costs that reflect their speed and flexibility. As SME owners, you should make sure to prioritise responsible use, here’s how:
1. Have a clear exit strategy
The most important aspect of a bridging loan is the exit plan. You should only apply for a bridging loan if you have a clearly defined plan for the repayment of the loan. Some typical exit routes include:
- The sale of a property
- Refinancing onto a longer-term mortgage or loan
- Using forecasted business cash flow once the funds have been realised
Having a credible exit strategy in place not only strengthens your application but it also protects your business from any unnecessary risk.
2. Match terms to your timeline
Bridging loans, as discussed earlier, are short by design, generally from 1 month up to around 12 months, with 24 months being available with a payment plan in place. So always make sure match your loan term to your exit plan. Avoid underestimating how long it will take to complete the sale, refinance or how long the next funding step may take.
3. Consider the costs carefully
Interest rates on bridging finance are usually higher than on traditional loans. Budget not just for interest, but also arrangement, legal and valuation costs, this will avoid you finding any surprises down the line.
4. Protect your most valuable assets
As bridging finance is secured against property, you’re using valuable business (or personal) assets as security. Only borrow what you are confident you can repay, this will protect your long-term business stability.
How our bridging loan calculator helps you plan
We know that planning and transparency is key when it comes to responsible borrowing. This is exactly why we offer an online bridging loan calculator. A simple and practical tool that will help you to estimate all of the costs of a bridging loan before you apply. Our calculator will allow you to input things like the loan amount, how long you intend to take the loan out for and the interest rate. Once you have entered all the details you need to enter you will get an idea of your total cost and monthly outlay before you make a decision.
For business-specific estimates, we also provide a business bridging loan calculator, this willhelp you understand feasibility for working capital or commercial property needs.
As you are able to model different scenarios based on the figures you have inputted you can move on with confidence knowing that bridging finance will fit into your overall business plan.
Making bridging finance work for your business
Bridging finance isn’t a one-size-fits-all product, each and every loan we provide has been personalised to the client’s needs. Any family-run SMEs in the UK with a long-term vision can use it to:
- Seize on a fast-moving opportunity
- Make sure there are no short-term cash-flow bumps in their business
- Strengthen their negotiating positions in a property deal
- Stay agile in a competitive market
The key to an effective bridging loan is the way that you plan: Have a deep understanding of your exit route, budget for any cost that may be involved with the loan and your business as a whole, and line up longer-term finance or a sale in good time.