When taking out a bridge loan, the business use the funds to buy or upgrade certain assets that can potentially increase their revenue or lower their costs, or both! In addition, it’s a useful way for a business to finance its own operations entirely, not just certain aspects of the business. Once the business is able to secure long-term financing, you’re able to use the funds from the new long-term loan to pay off the bridge loan you acquired first.
Businesses use bridge loans that (often carry a higher interest rate than conventional long-term financing) can help fill short-term funding gaps. These include asset purchases, such as real estate, equipment, and inventory.