How Does a Small Business Bridge Loan Work?

Sep 29, 2021

The costs of running a business can be immense. Stocking inventory, managing payroll, paying down pre-existing debt... the list goes on.

As a matter of fact, the average debt load for small business' in America is almost $200,000. That number may shock some but so long as a business' income to debt ratio is balanced, having debt that's getting invested in the continued operation of a company is a common, productive practice.

If you own a business and are looking for ways to get quick capital to keep operations running between securing long-term financing, you may have considered a bridge loan. But if you're like most people, you're probably asking yourself, how does a bridge loan work?

Our team at Express Capital Funding has put together this brief guide to help you better understand business bridge loans and determine if they're right for you.

What is a Bridge Loan?

Bridge loans are short-term loans designed specifically for business'. They are offered to companies that need help bridging their cash flow for a variety of reasons. Basically, if you feel that you're experiencing a capital shortfall, a bridge loan can help.

What Can a Bridge Loan Get Used for Specifically?

Bridge loans are obtained to inject more working capital into a business that's generally between long-term financing. That means that anything you deem a necessary business expense could get funded via a bridge loan product.

Some common uses for bridge loans include the following:

  • Paying off tax liens
  • Funding payroll
  • Helping get through seasonal lulls in business
  • Acquiring parts and labor to fund projects
  • Recruiting costs
  • Stocking up on inventory

Note that the above are just examples. The full spectrum of what your bridge loan could get approved for will depend on guidelines laid out by your lending institution.

Are Bridge Loans Secured or Unsecured?

Understanding whether or not your bridge loan product is secured or unsecured is important given their varying implications.

With a secured bridge loan, your loan would need to get backed by company assets valued at or above the loan amount you're borrowing. If you default on your loan your lender will seize the assets you've backed the loan with.

With unsecured bridge loans, backing your loan product with assets is not required. Instead of relying on assets, lenders will look at other factors relating to your company to determine your eligibility such as your provable income.

Ask your lender which bridge loan type, secured or unsecured, is available to you. Discuss with the lender the possibilities with each.

Advantages of Bridge Loans

Bridge loans come with a variety of advantages when compared to traditional long-term loans companies take on.

Below are a few key benefits commonly associated with bridge loan products:


Securing long-term loan products can be beneficial to the sustained success of your business. The time it takes to obtain those loans are extensive.

Given the size of long-term funding solutions, lenders screen loan candidates thoroughly prior to paying out.

Bridge loans are short-term and represent a smaller monetary risk. Lenders are much less scrupulous when offering approval when funding these loans. The benefit is that many lenders can get business' bridge loans funded the same day the application is submitted.

Ease of Application

Bridge loans are helpful in these situations. Given the reduced risk bridge loans present to lenders, they make getting the money easier for business'. One of the ways they do this is by keeping applications simple.

Applications for a small business bridge loan can be a single page or shorter. They typically just ask basic questions of business owners to determine loan eligibility.

Flexible with Credit

If you run a business and have poor credit, securing long-term financing can be difficult. If you need money now to keep operations running, that may create a problem.

Bridge loans are helpful in these situations. Requirements to secure a bridge loan are less than what's required for long-term financing. That means business owners with less than stellar credit can get funding fast while they continue to shop around for long-term financing.

Disadvantages of Bridge Loans

The highly flexible nature, ease of acquisition, and speed in which bridge loans get funded are all advantages this loan product offers. Still, there are some drawbacks to bridge loans you should be aware of.

The chief disadvantage to bridge loans is usually the interest rate they come with, usually for businesses with bad credit. Be sure to understand what you're borrowing in principal and what you'll be expected to pay back given the interest rate you receive.

This will help ensure you don't unexpectedly end up unable to maintain your monthly loan payments.

Be mindful of bridge loans fees. Some lenders may come with higher than average origination fees, account setup fees and more.

Fees and interest rates will vary based on your lending institution and your particular financial situation.

Ask your lender which bridge loan type, secured or unsecured, is available to you. Discuss with the lender the possibilities with each. Ask your lender which bridge loan type, secured or unsecured, is available to you. Discuss with the lender the possibilities with each.

Do your diligence when talking to lenders to find one that offers you the best terms.

Summarizing How a Bridge Loan Works

Bridge loans are short-term loan products designed to help companies bridge their finances until they can secure longer-term financing. Bridge loans can get used to fund a variety of operational expenses from payroll, to your building's lease payments, to inventory and beyond.

Small business' benefit from the ease and simplicity of getting approved for bridge loans. They enjoy the convenience and speed that lenders will fund these loans post-approval.

It's important that business owners understand all fees, interest, and expected payments associated with their bridge loan product. Discussing your expected payments with your lender in-depth prior to taking on a loan will significantly increase your ability to responsibly pay back your debt and allow you to continually grow your business.

Are you a business owner looking for a responsible lender who offers quality, unsecured bridge loan products to businesses?

At Express Capital Funding, we offer simplified, small business funding solutions. Our products are flexible and can get funded the same day that you apply.

We offer additional information if you have unanswered questions regarding the benefits of a bridge loan.


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