Debt Refinance

Debt is part and parcel of modern commerce, but businesses must remain adaptable when handling debt; bridging loans can help enable this financial flexibility.

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Modern commerce relies heavily on financial flexibility; the ability for businesses to transfer and re-arrange their debt to minimise costs is vital for their commercial prosperity. Incurring debt is simply a part of trading for many businesses, but poorly handled debt can prove to be a burden. By restructuring and refinancing debt it’s possible for companies to minimise the impact their debt has on their trading ability and cash flow, and debt refinance is an important function of a bridging loan. Bridging finance makes an ideal solution for the challenges that face businesses with debt in need of restructuring, and in this article we’ll highlight some of the reasons why bridging loans can solve the problems of debt refinance for businesses.

While restructuring and refinancing debt can be highly desirable in some situations it’s not always the best choice; in certain circumstances there are other options that can be implemented, and while bridging loans are an exceptionally flexible method for arranging debt refinance they are not always the first choice. Before committing to any borrowing it’s important that business owners consult an experienced financial advisor - without expert help, it’s hard to know precisely what your best option is, so it’s important to seek their input.

Bridging loans for debt refinance

As we’ve already discussed, debt is simply a fact of life for businesses; the demands of modern commerce are such that a business’ cash flow is often the deciding factor in its profitability, and businesses which can maintain a steady positive income are able to take advantage of new opportunities to increase their market share. It’s vital to minimise your ongoing costs as a business owner by reducing the impact that debts have on your monthly balance sheet, and taking out a bridging loan to help cover this cost can be an excellent solution.

A bridging loan is in essence a short-term financial solution; they are intended to “bridge the gap” whilst a long-term solution is put in place. This means that a bridging loan is rarely the end goal of debt refinance, especially if the debt will be ongoing; it can be fairly costly to maintain a bridging loan, so most businesses will repay them as soon as possible. While a bridging loan is not necessarily a final answer for debt refinance, it does grant businesses some time to maneuver, and when a debt could otherwise prove problematic to deal with a little breathing space can be all you need.

A good example of a problem that bridging finance can solve is the sudden calling-in of a debt; if a creditor gets into trouble, or has bills of their own to pay, they may suddenly decide to call in their loans. This puts your business in a bind; you need to repay, but with little cash on hand there’s often no option but to sell off assets in order to meet this bill. With many businesses operating in a heavily leveraged state, this sudden change in equilibrium is often enough to throw them into a downward spiral: having sold off assets to repay their debt they’re unable to operate profitably, and are eventually forced into bankruptcy.

Bridging finance presents a viable solution in this instance. Because bridging loans can be put in place exceptionally quickly (often in as little as a week) they can be used to resolve an outstanding debt swiftly and easily. While this then requires the borrower to pay interest on the loan, it doesn’t require them to sell up any of their assets.

Bridging Loans vs Other Debt Refinance Options

Bridging loans fulfil a special role within the debt refinance market. There are two other options which businesses can use to restructure and repay debts as necessary, but neither can claim quite the same qualities as bridging loans can.

  • Unsecured Loans: It’s possible for businesses to borrow money quickly without securing it against any of their assets. These loans are secured personally, meaning that whoever takes out the loan is responsible for repaying them even if the company goes bankrupt. These loans can be obtained quickly, but because there is no security on the loan they’re often capped at a fairly low threshold, which can be limiting for businesses in need of a higher level of finance. In addition, because these loans aren’t secured against an asset they are often limited to businesses with a fairly long trading history of at least two years.
  • Long-term secured loans: Businesses which need to meet a big bill often turn to banks for help, because it’s these large institutions that can provide the necessary funding. However, banks are subject to intense scrutiny and have their hands tied when choosing who to lend to; they must conduct lengthy checks and interminable paperwork before agreeing to anything, which means loans take a long time to put together. While a long-term solution is usually the objective of debt refinance, it’s often not possible for businesses to wait for bank approval; by the time the bank agrees to the first loan, the business has gone bankrupt.

Bridging finance fulfils a valuable niche in between these two forms of debt refinance. While it’s still possible to take out a loan quickly, as with unsecured borrowing, it’s also possible to acquire a large amount of funding, just as with a mainstream bank lender. This enables bridging lenders to fulfil the needs of a wide variety of clients and to offer a range of solutions that meet every situation.

Refinancing Debt through Bridging Loans

Bridging lenders enable commercial borrowers to quickly and easily rearrange their finances to meet shifting priorities, and this financial agility is absolutely vital in the modern marketplace. When nothing is certain, it’s important for businesses to be able to swiftly adapt to a changing environment; being tied to debt can be far more damaging to a business than the debt itself, so every business owner should be aware of the role bridging loans can play in debt refinance.

Common Uses Of Business Finance

  • Overview

    Businesses need access to fast, flexible finance solutions, and bridging finance is an exceptionally good fit to meet the needs of modern commerce

  • Business Loans for SMEs

    SME's require a stable, flexible source of finance in order to meet deadlines and even out cash flow, and bridging finance provides an excellent solution

  • Capital Financing

    Bridging lenders provide fast, flexible finance that can be used to create capital for many different uses, enabling businesses to expand and invest confidently

  • Cash Flow Finance

    Businesses succeed or fail on the strength of their cash flow, and bridging finance can be an excellent way to maintain a cash flow’s resilience in tough times.

  • Debt Refinance

    Debt is part and parcel of modern commerce, but businesses must remain adaptable when handling debt; bridging loans can help enable this financial flexibility.

  • Farm Finance

    Farming is a difficult business, and farmers need to have a finance plan in place that enables them to expand and invest easily from year to year

  • New Business Finance

    Bridging finance provide a flexible way for new business owners to source essential extra capital, helping their commercial ventures get off on the right foot

  • Nursing and Care Home Finance

    Nursing and care homes are a unique blend of commercial and property investment, and require the careful touch of specialised, experienced bridging lenders.

  • Pub Freehold Finance

    Financing the purchase of a pub freehold or long leasehold requires the flexible, adaptable solutions that can be arranged with specialist bridging lenders.

  • Revolving Trade Finance

    A revolving trading finance facility is a form of funding that offers a highly flexible financial solution for businesses that need to meet fluctuating costs.

  • Short Term Cash Flow

    Temporary bridging loans are an ideal way to meet a business’s ongoing operating expenses, helping to maintain their cash flow whilst meeting unexpected costs.

  • Turnaround Finance

    Turnaround finance is a method of restoring a business in temporary difficulties, and can be used to save otherwise viable companies from bankruptcy.

  • Unsecured Business Loans

    Unsecured business loans enable small businesses to be flexible, meet expenses and expand without resorting to cumbersome long-term financial solutions

  • Working Capital Finance

    Bridging finance can provide essential working capital for businesses at short notice, and is a highly flexible way of creating funds for a variety of needs

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