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4 Industries That Benefit from Bridge Financing
March 20, 2018
Bridge-Financing

4 Industries That Benefit from Bridge Financing

The growth of a business is both a blessing and a challenge. It is exciting as revenues increase, but can be stressful because of higher operating and capital costs associated with growth. Whether you prepay for goods to fill a large order, need to purchase equipment, or expand the facility, your company may have a need for interim financing.

Bridge loans can increase your ability to capitalize on new opportunities and business. In this post, we’ll cover a few industries which frequently benefit from the use of bridge financing.

What is Bridge Financing?

A bridge loan is a “bridge” between current cash needs and future borrowing solutions. Once you receive bridge financing, you’ll have cash that you can utilize throughout a project, prior to getting paid by your customers. Without it, many businesses find it challenging to afford all the costs they’ll require to complete a job.

Common Uses for Bridge Financing:

  • Build or Renovate Real Estate Property
  • Improve Technology
  • Meet Payroll Needs
  • Buy Inventory
  • Purchase or Repair Equipment
  • Bid for Multiple Projects

Industries Which Benefit from Bridge Financing

1. Service Companies

As a service business owner, you likely have major challenges with cash flow because you typically receive payment after completing the service, even though you incur costs prior to finishing the work. Additional working capital may be needed to pay for staff, equipment, utilities, and materials before the client pays the invoice.

Here are a few examples of businesses within the service industry that frequently rely on bridge financing:

For instance, an event planner may prepay for goods and services before invoicing the client. An HVAC company doesn’t typically receive payment from the client until the completion of the installation, even though you must purchase equipment up front.

2. Manufacturers

Manufacturing companies have high capital needs. The faster your business expands, the more cash you’ll need to pay for this growth. You might use the funds to pay employees, buy materials, and invest in marketing promotions.

The process of fulfilling a large order includes the cost of making the product and delivering it to the customer. As a manufacturing company, you typically don’t receive payment until the customer receives the product, so having bridge financing can be crucial.

3. Construction Companies

It requires at least six months to build a single-family home, and commercial projects can take a year or more depending on the scope of the development. As a construction business owner, you could benefit from using bridge financing to pay for materials, equipment, labor, and other construction costs.

4. Real Estate Firms

Real estate is heavily dependent on both large amounts of cash. A successful venture often includes fast closings and enough capital to renovate a property before receiving profits. Whether you want to buy and flip a property or purchase and rent it out once renovated, bridge financing can provide you with enough cash to support upcoming projects.

Conclusion

Faster turnaround is a key driver in bridge financing, which allows you to meet cash flow needs and take advantage of new opportunities. Many industries benefit from bridge financing as a source of short-term capital, and if your business falls into any of these categories, it might be a great option for you!

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

BonnieAleman 1
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Bonnie specializes in writing for the financial and real estate industries, and graduated from the McIntire School of Commerce at the University of Virginia.
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