4 Industries That Benefit from Bridge 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:
- HVAC Companies
- Landscaping Contractors
- Event Planners
- Auto Technicians
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.
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.
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!
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