Many companies are using bridging finance to expand their businesses. There are a variety of reasons why they may want do this:
Some business opportunities require money quickly to complete a deal, perhaps a merger or an acquisition, or to complete a contract with a supplier. Unlike more long-term loans, bridging loans can be arranged quickly so an opportunity is not lost.
If a business lands an order larger than they are used to, they may need to purchase more machinery and materials. If the business needs to start the job as soon as possible, a bridging loan can quickly be arranged and used to purchase whatever is needed to complete the order.
An expanding business often needs more workspace or offices. Alternately existing space may need to be reorganized by adding mezzanine flooring, more shelving or new office equipment. A bridging loan can be used for this.
Sometimes a business is failing, but the management believes that they can turn it around. Bridging finance can be used to help finance a management buyout.
Bridging finance can be used to release equity in company owned buildings. Sometimes start-up company owners use the equity in their residential homes to raise capital for expansion.
Expanding a business can mean investing a lot of money. This can result in low cash flow. If an unexpectedly large bill arrives, there could be difficulty in paying it. A bridging loan can pay off the debt.
Bridging loans can be very useful for growing a business, as long as there is a clear plan of how the loan will be repaid.