What is Business bridging finance in South Africa?
Business bridging finance, or a bridge loan, is a short-term loan that is typically taken out for a period of 2 weeks up to 12 months. This type of funding enables sudden or unexpected cash flow gaps to be plugged, in and can also allow businesses to invest in growth opportunities when business is slow.
Business bridging finance is ideal for when day-to-day operational costs such as materials or inventory purchases, salaries or rent need to be met in order to continue producing a product or a service.
How does business bridging finance work in South Africa?
Each different financial institution will offer its own version of bridging finance. The amount of funding you receive, and how long you will take to pay it back, will determine the exact nature of your funding offer and the costs associated with it.
Before you receive funding, the financial institution will often need proof that your business will be receiving sufficient income over the period of the loan. You can provide proof in the form of contracts, invoices sent out, or purchase orders.
Where most traditional financial institutions have restrictions on what you can spend your bridging finance on, alternative lenders, such as Lulalend, offer unrestricted bridging finance. This allows you to spend the funds on any expense associated with your business.
The Benefits of Business Bridging Finance
For many businesses, customers failing to pay on time are a common problem. This puts a business under severe financial strain and affects the ability to buy new inventory or pay employees’ salaries, amongst a number of other challenges. Bridging finance allows your business to continue operating effectively without worrying about delayed cash inflows.
Here are some practical benefits of business bridging finance:
- Being short-term in nature, funds can often be approved faster – especially via alternative lenders such as Lulalend
- Allows your business to continue production of goods or services even when cash flow is tight
- Aids business growth by allowing expansion plans that require significant investment to continue, as other day-to-day costs can still be met
Who offers bridge loans?
Traditional banks, alternative financial institutions, and government funders all offer bridging loans.
Lulalend’s funding specialists advise customers to be wary of unscrupulous lenders in this space. It is important to take out loans from reputable companies that only offer you loan amounts you are able to repay. As much as being approved for larger amounts, or being offered a loan even if you are blacklisted, may be tempting, often the repayment costs will harm your business in the long term.
Do banks offer bridging finance?
In South Africa, most banks provide bridging finance to business owners so they can cover cash flow shortfalls. However, it’s important to remember that traditional banks require collateral or restrict the use of the finance you’ve taken out. For example, they may state it must only be used to pay a specific supplier.
How much interest do you pay on bridging finance?
The interest associated with bridging finance will depend on the funder you choose, the total amount of your loan, and the period you take the loan for.
Lulalend will charge fixed monthly costs of 2% – 6% of the capital amount for bridging loans. The exact costs will vary from customer to customer. Unlike most lenders, Lulalend does not charge penalty fees on early repayments. This is something one should take close note of when going through a lender’s policy on repayments.
How long does it take to get a bridge loan?
Each lender has its own disbursement terms and how long it will take will depend on the amount of the loan and the type of loan you need.
At Lulalend, we disburse funds to successful applicants within 24 hours.
Are bridge loans a good idea?
Many SMEs admit that having inadequate cash flow is a problem that arises often. Bridging finance is a way to help ease the ups and downs of managing a business and its access to funds.
A bridge loan is a great solution for businesses that need access to funds quickly in order to take advantage of new business opportunities or to pay one-off or unexpected costs.
Why choose Lula?
Lula offers bridging finance that is unsecured, more affordable than traditional banks, and easily accessible within 24 hours. Plus, there are no penalty fees for early settlement.
Lulalend and Business Bridging Finance
We understand that different businesses have different needs, which means their financing requirements will differ too.
Our business bridging finance offer is unsecured (no collateral required), affordable, and easily accessible. We also allow you to settle early without having to worry about penalty fees. With Lulalend’s quick and easy online application, you can access business funding of up to R2 million within 24 hours. Our application is completely paperless, requires no collateral, and you’ll have an answer in hours.
If you’re looking for funding for your business, read more about Lulalend’s business funding options here.