Business Bridging Finance

If you have a temporary cash flow problem because you are attempting to buy a property, or a business, you may need a bridging loan. Perhaps you are ready to buy a new home or commercial premises but the sale of your current property may not have cleared.

A business bridging loan is a short term mortgage which is secured by your property. The bridging loan may have a higher interest rate than your conventional mortgage, but you can gain the loan quickly to bridge the time between your purchase and your sale. A business bridging loan is best for the person that is fairly certain of their business situation and ability to repay in a few months.

A number of businesses may be eligible for the Small Firms Loan Guarantee (SFLG).

• The Government guarantees bank loans to small firms with viable business proposals, in situations where they have been unable to secure a loan through conventional channels.
  
• Businesses who have an idea to develop or market an innovative product, process or service, but are not sure whether they are ready to take it forward successfully, might be able to receive help under a Grant for pursuing an Innovative Idea.

The Small Business Service has made available a series of guidance notes covering potential sources of EU funding available to small firms.

Government Legislation
As part of its package of measures to combat late payment, the Government introduced the Late Payment of Commercial Debts (Interest) Act 1998, which gave small firms with 50 or less employees a statutory right to interest for the late payment of commercial debts. This statutory right to interest and other new entitlements are available to all businesses and public sector bodies from 7 August 2002.

As an innovative and growth-orientated business, you might be having difficulty attracting the investment you need to innovate and grow your company. The following schemes supported by the DTI can help address this problem:

The SFLG guarantees loans from the banks and various other financial institutions for small firms that have viable business proposals but who have tried and failed to get a conventional loan because of lack of security.

The Government is keen to explore how ECF's might improve SME access to equity finance. They will help fill the ‘equity gap’ that faces some high-growth businesses seeking relatively modest amounts of risk capital. A pathfinder round of ECF's will be launched once state aids clearance has been received from the European Commission.

Venture capital provides long-term committed capital to certain businesses. Venture capitalists will purchase shares in growing businesses on behalf of institutional investors. Venture capital investors are committed to the long-term success of the business, obtaining their return by way of dividends but principally by selling their shares in the business in due course.

Venture capitalists are looking for businesses capable of growing quickly, usually within five years. These businesses must be able to demonstrate a specific competitive advantage and differentiation in a chosen market and be led and managed by an experienced and ambitious management team.