You might find yourself needing funds to cover costs for a short time before you can secure permanent financing, improve cash flow, or get customer payments. If this is your case, you might benefit from bridge financing. This is common if you are paid in installments, buying property, or making other large investments.
Bridge financing comes in handy for these large, short-term investments. However, since bridge financing is not generally considered a traditional form of financing, some people might be confused on how to apply for it.
In this article, we will go over the steps to take to apply for bridge loan financing so that when you need it, you will know exactly what to do.
4 Steps to Take When Applying for a Bridge Loan
Check your financial health
A bridge lender will want to know if you are a creditworthy borrower or not so they will look at your overall financial health. Bridge financing is risky for the lender, so this is a key factor.
You should evaluate your business’s overall financial health prior to applying. You should know your business’s typical monthly sales, credit score, and other financial information. It will be hard to get approved if you have poor credit.
In addition, if you already have a large amount of debt or you have no track record of completing these types of transactions, you may struggle to get approved.
Research Multiple Lenders
Compare your options when you are shopping for small business bridge loans. The terms and conditions of bridge financing vary considerably from lender to lender, so it is important to select a lender with options that fit your needs. Some might specialize in different projects so make sure you research beforehand on who you would like to apply with.
Gather All Documents
You will need to provide several documents so the lenders will have all the information they need to review your profile. Some will want to see tax returns and an action plan that shows a breakdown of the costs of your project. They need this so they can evaluate the likelihood of your plans falling through and you not being able to repay the small business loan.
You should also bring in your resume. A track record that is successful will improve your chances of getting approved and the lender will appreciate you for doing so.
The Bottom Line
Hopefully when you apply with your lender of choice, you will get approved. Before you sign the dotted line, make sure you have asked them the appropriate questions if needed. When you have the bridge financing in place, it is now your turn to turn that working capital to grow your business.