Common Mistakes Made While Seeking Bridge Finances and How to Avoid Them

Common Mistakes Made While Seeking Bridge Finances and How to Avoid Them

Many business owners are now readily applying for bridge loans to solve their interim financial issues but most fail to understand its working principle. This leads them to make mistakes which impact the final outcome of their loan application.

Bridge loans are swift money short term loans which you can procure within a day. Their lenders are no miscreant finance sharks who take advantage of your situation, but their interest rate is higher than that charged by a conventional lender. They provide the requisite funds for your business in a way that are not in the norm of traditional lending bodies like banks and other establishments. The received money is crucial for smooth running of the business. In this post, we discuss some of the common mistakes made while applying for the loan and how to avoid it.

Keeping only the interest rate in mind

This is perhaps the biggest mistake made by any borrower. While this is a major factor, you must also consider the time and all other loan fees. This helps you calculate a cumulative cost of the loan along with a concrete parameter to compare loans of various other lenders. Thus, you are able to pick the best loan option genuinely.

Applying for a loan without any exit strategy

Before one even applies for a bridge loan, one should be prepared with a proper exit strategy. The number of loans that are currently running on any business, the duration of its clearance, etc. should be considered. The interest rate can go higher if the borrower has not been able to pay the loan installments on time. This hike of interest rate can be substantial and create further difficulties for the borrower to pay off his debts. The best exit strategy to adopt is to take the loan only when there is no other alternative and when you already have a plan to pay it off, preferably before its end date.

Failing to provide a story to the bridge lender

For any financial transaction, the traditional lenders have a fixed road of generally requiring a credit report, recent bank statements, loan application and two years profit and loss statements. However, the bridge loan lender can be influenced by your story and can even make changes in the loan contract if convinced with your story. You can easily bypass hurdles like low credit scores, tax liens, pending foreclosures, etc. with the right story.

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