When Should You Consider Short-Term Financing?

During a time of particularly strong uncertainty, people tend to look for flexible solutions that can help in the immediate term whilst organising long term options.

During a particularly fast-paced property market where sellers have the power, for example, short term property finance can be the difference maker that helps you get the property you want whilst you wait for an agreed sale to complete or an application for a long-term mortgage to be accepted.

In business, as well, mezzanine and bridge loans are an increasingly common way to ensure that a company’s financial obligations are met in the short term whilst waiting for funding, investment or long term financial support.

However, there is a lot to consider before taking out any form of short-term loan due to the risks involved, so with that in mind, here are some reasons short-term finance options could be the best option and times when you should seek financial advice before doing so.

When Flexibility Is Essential

Most of the biggest reasons to take out bridge loans or other short-term financial options is because of a need for financial flexibility and agility that would not be there if you needed to wait for revenue.

Property auctions are a good example of this; as decisions on sale prices are often not made until the day itself, securing conventional property financing can be too restrictive and can mean someone who does not have the cash can miss out on a bargain.

A bridge loan can help with this, so long as the house can be flipped before the terms end or more long-term finance is secured.

Preventing Catastrophe

Borrowing to get out of debt is not a good idea, and should be avoided if a business has any possible alternative options.

However, in some cases, particularly given unpredictable circumstances, there are sometimes no other options besides default or bankruptcy.

Given that these two scenarios can make a financial situation significantly worse, it can in very rare circumstances be the better option.

As A Credit Rating Boost

If you have a strong income but need a small advance to ensure debt remains manageable, taking out a small loan and paying it back in full can have the ancillary benefit of boosting your credit