Bridging finance rescue for urgent payroll needs
In a tough situation, a family-owned business faced an unexpected setback when their invoice factoring company delayed finance on several large invoices which caused a cash flow issue. The timing couldn't have been worse, as the company's £100,000 payroll that needed to be processed by the following Friday was now squarely in jeopardy.
Short-term finance secured to manage urgent cash-flow issues
The time-critical situation prompted the business owners to explore alternative financing options. With just a few hours remaining on Friday afternoon, they contacted us regarding an urgent bridge loan.
Our quick response:
Recognising the time-sensitive situation, speed would be the only saving grace. Here's a rundown of the timeline of events:
- Enquiry (Friday, 4:30 pm): The initial contact led to a quick assessment of the business's needs and the potential for bridging finance to cover the immediate payroll.
- Offer (Friday, 5:00 pm): Within just 30 minutes of the initial enquiry, we provided a loan offer detailing the terms of the bridging finance.
- Documentation (Saturday, 12:00 pm): The necessary paperwork and documentation were prepared by Saturday midday, enabling the borrower to review the loan offer and terms less than 24-hours after enquiring. The same day, the borrower's independent financial advisor reviewed the loan agreement and advised their client.
- Site Visit (Saturday, 2:00 pm): A site visit was conducted Saturday afternoon to assess the property that would secure the bridging loan.
- Loan Agreement (Monday, 11:00 am): The loan's legal paperwork was completed first thing on Monday morning, by way of using dual-legal representation - expediting the whole process.
- Funds Released (Monday, 2:00 pm): By 2 pm on Monday, the £100,000 bridging finance amount was deposited into the business's account.
In this case, the family business opted for a bridging loan secured against the managing director's house, providing the necessary funds to meet the impending payroll.
The bridging loan was structured for a three-month term, providing a reasonable timeframe for the business to recover from the unexpected cash flow challenge.
Benefits of choosing bridging finance
A recent survey of over 1000 people showed that one of the most important factors when deciding to use a bridge loan was 'Urgency' (voted by 97%).
Speed of Access: Bridging loans offer short-term financing, with a significantly quicker completion timeline when compared to traditional finance. In urgent situations, they can be approved in as little as three days from the initial application.
Flexibility: Bridge loans are known for their flexibility, allowing businesses to secure financing quickly without the lengthy procedures associated with traditional lending. This enables borrowers to address their immediate financial requirements without the obligation of repaying the principal until the conclusion of the loan term.
Possibility for No Early Repayment Charges: Based on the particular terms of the loan, certain bridging loans may provide the option of early repayment without imposing penalties. This proves advantageous when borrowers can settle the loan ahead of schedule, effectively minimising their overall interest expenses.
Role of bridging finance and brokers in resolving business challenges
This highlights the critical role bridging finance can play in circumventing an urgent financial crisis. By quickly responding to the family business's needs, we facilitated a seamless process, allowing the company to meet its payroll obligations and avoid potential repercussions.
A good broker should know which lenders to approach in such situations. Lenders who are willing and able to complete finance facilities over a weekend are few and far between; however, our relationships extend to several private investors and family offices who actively lend in such scenarios.
