Bridging Finance for Small Businesses
Bridging Finance has always been a popular term in the real estate business. However, you can also apply those practices in other fields. In simple words, bridging finance is a short-term loan to keep the cash flow steady while you wait for the long-term (and expected) payments. In this article, we will be focusing on bridging finance for small businesses in South Africa.
So, what exactly is Bridging Finance?
Bridging Finance is a short-term (term up to 1 year) loan to ‘bridge the gap’ in the cash flow of your business. For example, if your business is waiting for assured finances but it is taking some time, you may have to opt-in for bridging finances. Why?
- Your business needs upkeep.
- You have to pay salaries to your employees.
- There is a lucrative deal for your business.
- Investment opportunities.
- Kickstart finances.
You will need to show your lender proof that you can secure the loan repayment within the decided timeframe. This proof will mainly include the documents and receipts related to the expected, long-term cash flow your business will receive. And of course, you will have to present some collateral as well.
The term duration and the interest rate will different individually and it depends individually. Usually, the interest rates are higher than conventional loans but it is also quicker than traditional bank loans. This is great for small businesses, especially when they are in a pinch. It will keep the cash inflow steady and keep your business running.
Where to get Bridging Finances in South Africa?
Bridging finances are especially popular because most banks are reluctant to fund small and medium scale businesses in the first place. Since 2020, we have seen a huge drop in the economy overall due to the COVID-19 pandemic. But even before that, we have seen multiple reports about how banks are usually reluctant to finance small and medium scaled businesses. This is where bridging finance comes in. Unlike these traditional loans – if you get them – bridging loans will be available within a matter of a day or even hours.
Bridging finances are typically provided by alternative lender agencies, though a few banks and even government funders may provide it. There are many agencies available in South Africa that provide bridging finances to small and medium businesses. We are listing a few reputed lenders that can provide short-term finance for your business.
There is a huge list of Bridging Finance service providers in South Africa on Tuugo. But we must warn you, there are scammers everywhere and bridging finance agencies are not an exception. Make sure you read all the terms and conditions and other documents carefully, consider taking second opinions before you go for the option. Furthermore, it is also important to understand bridging finance related risks (Source: Business Finder). Make sure you are aware of them before you tread this path.
Bridging finance is a great way to keep your small business going in South Africa. Funding is often a problem for small businesses. This is why, despite its risks, bridging finance is a viable and profitable financial solution for your business. It can help you make a deal, upkeep your business, pay employees’ salaries, make a profit on deals, and so on.
If you need any help regarding bridging finances, such as getting a second opinion, please feel free to connect with us. Digital Lime Green is a small website agency in Cape Town, South Africa. We provide quality Web Design, Digital Marketing, and Social Media Management services at affordable prices. If you need any of these services, feel free to ask us for a quote.