Asset Based Lending & Bridge Loans for Businesses
Asset Based Lending & Bridge Loans are both great alternative methods of financing for business owners in certain scenarios where traditional loans are feasible. If your situation warrants getting either type of loan, then make sure to read further to understand the merits of the two types.
Asset Based Lending
Asset Based Lending refers to lending that uses your business’s assets as collateral in exchange for a certain loan amount. If you have equity built up in assets that are not considered real estate, then you can obtain a loan based on the total value of your assets.
Typically, this type of loan is tied to your business’s inventory, accounts receivable, equipment, and most types of machinery/equipment used in business operations.
When should you consider an asset based loan?
Usually, you only want to consider asset based lending if normal avenues of fund raising have failed. For example, after you have sold bonds to investors and still need to raise capital to grow or continue operating your business.
Basically, an asset based loan should be used in similar fashion to a business line of credit. In other words, it should be used to augment the gap of time between paying expenses and receiving cash flows.
Bridge loans are named after the purpose they serve financially to small business owners: it is a loan that acts as a bridge between when you need some capital to grow or build your business up and for when you will eventually earn qualification for longer term types of financing.
In essence, bridge loans are meant to be short term in nature and feature interest only payments. The time period on a bridge loan can be as short as two weeks and as long as three years, depending on the needs of the business. This is interim financing, so interest rates are often higher than long term financing options. However, bridge loans can serve as a useful financing method to enable a small business to weather the time period while better financing arrangements are acquired.
An example of when a bridge loan would be used is in the Commercial Real Estate sector, a typical application of this loan type. To quickly close on a property, bridge loans are often used to ensure you don’t lose out to competitive bidders. When the property is refinanced (or sold) through more traditional lending types, we are then able to offer a more conditioned round of mortgage financing with far more favorable interest rates and terms to the borrower.
Worldwide Capital Management strives to offer the best possible services to businesses who need it. To that end, we have proudly joined forces with Bellwether Funding, LLC. This gives businesses the unique opportunity of having support and resources from multiple lenders to help fuel overall growth throughout the lending process.