A business startup often needs to raise capital and there are a number of finance options available. Before trading, there are set up costs, and often during the first few months trading, there may be fewer clients and a low cash flow.
A business loan or a bank overdraft is the normal way most businesses raise money. If a business has not traded for long, or is about to trade, then it can be difficult to get a business loan because the business has not yet established a credit record. Some lenders will not consider an application for a business that has been trading for less than two years. This is why when first starting out, some people with a good credit history use a personal loan or a credit card to raise funds for their new business.
Once the business is trading profitably, a business loan can be used. A solution for short-term finance is a bridging loan. If the business is seasonal, a bridging loan can provide working capital to deal with low cash flow during the low season. Bridging finance can also be used to purchase stock, equipment, property or to finance growth.
The business needs to have a clear exit strategy detailing when and how the bridging loan will be repaid. A bridging loan will require security, usually property, which could be the business owner’s house or the business premises if owned.
A bridging finance broker can arrange a suitable loan.