In most cases, short term cash outflow spikes are covered off by lines of credit, credit cards, and equity injections from the business owner or owner.
But there are times when the credit in place is still insufficient to cover off the capital needs of the business and if the capital cannot be supplied in a timely fashion, the business can either lose out on a profit making opportunity, or incur a cost or penalty from money not being advanced when due.
There are different types of asset based lending such as factoring, inventory financing, and purchase order financing that can also be used for short term capital needs, but all of the these are going to take some time to set up and can be quite costly to the business.
One of the better ways to generate the additional capital that you need in a hurry is to take advantage of equity you have in real estate property.
This can be property owned by the business, a related or unrelated company, or even personal property such as a home.
Regardless of the type of real estate, as long as you have equity in it and control with respect to leveraging the property, there is a good chance that a private mortgage can be arranged as a business bridge loan.
While a private lender may want to know what the money is going to be used for, they are more interested in the equity in the property as well as the exit strategy to retire the debt.
So for instance, if a manufacturing or distribution business had the opportunity to manufacture or distribution certain goods via a purchase order, but lacked the working capital to complete the order, this would be an example of a short term capital requirement of the business that could be paid back at a predictable time in the future from a well defined transaction.
Yes, this type of transaction can be financed through different types of asset based lending such as purchase order financing, equipment refinancing, and so on, but none of these other asset based lending solutions are going to be as fast and as cheap as a private first or second mortgage on a property.
Now when I say cheap, we’re not talking about bank prime rates, but compared to other forms of capital available, the cost is likely going to be the lowest available.
And in terms of time, bridge financing provided via mortgage is typically completed in ten business days with the potential for fast closings to occur in two to five business days.
Many times private lending on property is overlooked for this type of transaction, resulting in the business owner utilizing higher cost options instead.
But if you’ve ever accessed incremental capital in this fashion, especially when you were pressed for time, you know that it can be a very fast and cost effective option.
If you are in need of a business bridge loan and have equity in real estate to leverage, I suggest that you give me a call and we’ll quickly assess what private financing options may be available to you.
In many instances we can get a lender proposal back to you in a matter of hours with funding to follow shortly there after.