There’s a common misconception when it comes to financing that can inadvertently slow your business growth. Some small business owners think that only loans with the lowest interest rates are worth investing in. While it’s true that you should try to save as much money as possible on loans, cutting yourself off from medium-interest options such as bridge financing may make you miss out on valuable opportunities.
How Important Is the Interest Rate When Choosing Financing?
The simple truth is that there are many situations where your primary goal isn’t to get the lowest interest rate but rather to get the financing you need when you need it. A case in point is a personal or business credit card. Credit cards have some of the highest interest rates out there, but when you use them wisely it’s not a problem. Instead, they’re a valuable tool for buying a new computer on sale, taking advantage of discounts for inventory, improving your cash flow and much more.
So, while getting a low interest rate is great if the circumstances call for it — such as a long-term purchase — there are plenty of times when it’s fine to pay a little more in interest. Equipment leasing is another example where you pay more over time in interest, but monthly payments are actually lower and more manageable for small businesses.
How Can a Bridge Loan Help Your Business?
A short-term bridge loan can give your business the money needed to buy inventory in bulk. You can cover payroll, payments to suppliers, taxes and other needs. The idea is that once your customers pay you, you can easily pay off the bridge loan before the interest adds up.
It’s also common for businesses to use bridge financing when purchasing real estate. Getting an SBA loan provides very low interest rates, but the downside is it can take months to get approved. How can you close on the property you want in the meantime? Your bridge loan can cover most of the cost, letting you move in and get started in your new location. As soon as the SBA loan comes through, you use the funds to pay off the bridge loan.
Why Choose Bridge Loans?
What all of this means is that bridge financing can give you exceptional advantages when you use it correctly. Bridge loans are intended to do what the name suggests, bridge the gap between your current capital and your needs.