YOUR COMPANY IS LOOKING FOR COMMERCIAL FINANCE ALTERNATIVES!
BRIDGING LOAN AND BRIDGING FINANCE SOLUTIONS FOR CANADIAN BUSINESS
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Financing & Cash flow are the most significant issues facing business today.
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
COMMERCIAL BRIDGE LOANS
Commercial financing for private companies in Canada, or the lack of it, has been challenging for companies in the SME sector (small to medium enterprises) for some time.
Commercial Bridge loans, often short-term in nature, can save a company in times of financing need. All business assets, including real estate, can be utilized for bridge funding scenarios. Let's get started.
Remarkably, even the owners of Canada's largest stock exchange, the TMX Group, recently announced capital raising activity for companies whose long-term goal is to ' go public. '
Bridge the Gap: Your Business Can't Wait for Traditional Financing
Your business faces an urgent opportunity, but traditional bank loans take months to process. Every passing day risks losing that prime real estate deal or expansion opportunity.
Let the 7 Park Avenue Financial teams show you how Commercial bridge loans provide the rapid capital injection you need, typically closing within days instead of months, keeping your business momentum strong.
Three Uncommon Takes on bridge loans :
- Bridge loans can actually strengthen your negotiating position with traditional lenders by demonstrating market validation of your project
- Some bridge lenders specialize in specific industries, offering valuable sector expertise beyond just financing
- Bridge loans can be structured to include future acquisition financing options, creating a comprehensive exit strategy
Commercial Bridge Loan: The Solution When Lack of Bank Financing Requires Business Capital
In the meantime, the business owner grapples with the lack of bank financing and finds himself or herself considering bridging finance solutions—those bridge loans and alternative finance solutions that are non-bank in nature.
In such scenarios, gap financing becomes crucial to bridge the financial shortfall until more permanent solutions are secured.
Top experts, including those TMX gurus, tell us that ‘ bank loans and venture capital are more challenging. ‘
Naturally, larger private financing comes with ‘ control ‘ issues or the loss thereof. The stats tell us that when private equity and VCs exit your firm, they often own a majority interest in the business—over 86% of the time!
MANAGING DEBT VERSUS EQUITY IN YOUR BUSINESS
Financing in the SME sector typically involves amounts of 250k and goes up to the 10-15M dollar range. Businesses may often need to manage an existing loan while seeking new financing options. The challenge for the owner from traditional lenders is almost always the same: debt or equity.
BANKS FOCUS ON CASH FLOW, RATIOS, AND COVENANTS
The core of bank financing in Canada revolves around our chartered banks’ ability to ensure loaned funds are always secure.
One key concern for businesses is managing interest payments on their loans. Without cash flow repayment power or significant unencumbered assets, getting all the financing you need will be difficult.
While the entrepreneur dreams of hyper-growth, the bank dreads it - there go the ratios!
CONSIDER THE GOVERNMENT-GUARANTEED LOAN PROGRAM IN CANADA
The Canada Small Business Loan program is often a reliable alternative for start-up or fledgling companies.
A short-term loan can be a viable option for businesses needing immediate capital. It’s all about the government guaranteeing loans that typically max out at 350k - recent changes to the program have made this program worth watching.
The program's most popular attributes are the interest rate terms and conditions and limited guarantee.
The challenge with taking on debt in commercial financing is simply repayment ability—don’t forget that repaying bridge and asset loans comes at the cost of not ploughing that money back into the business.
Many businesses in Canada become so focused on their debt that the hurdles to growth and success are higher.
EQUITY CAPITAL
Equity capital in Canada can come from several sources. In addition to the new kid on the block, ‘ Crowdfunding,’ the owner can also solicit capital from Angel investors, VCs, and strategic partners. Funds from equity capital can be used for capital improvements, enhancing the value of the business.
While equity investors rely on sales projections, future valuation, and operating margins, the asset lender focuses on past and present financial statements. Here, the focus is on debt load, quality of accounting, and cash flows.
WHAT ARE COMMERCIAL BRIDGE LOAN SOLUTIONS IN CANADA
Bridging finance solutions in Canada include collateral based and unsecured bridge loans:
Short-term bridge loans are a popular choice for businesses needing quick access to capital.
A/R Financing
Inventory Loans
Access to Canadian bank credit
Non-bank asset-based lines of credit
SR&ED Tax credit financing
Equipment / fixed asset financing
Cash flow loans
Royalty finance solutions
Purchase Order Financing
Short Term Working Capital Loans/ Merchant Advance - easily accessible but relatively high interest rates
Securitization
HOW DO BRIDGE LOANS WORK?
Bridge loans offer temporary financing to cover the gap between selling an existing property and purchasing new commercial properties.
Typically secured by collateral, such as real estate, these loans are repaid once the borrower sells their current property or secures permanent financing. Unlike traditional loans, bridge loans have shorter loan terms, usually ranging from a few months to a year or more.
Due to their short-term nature, the interest rates and fees associated with bridge loans are generally higher than those of traditional long-term loans.
However, bridge loans' expedited access to capital and flexibility make them an attractive option for those needing quick financial solutions.
THE COST OF GAP FINANCING
Interest rates on these solutions will vary greatly based on collateral and overall credit quality. The loan balance can be adjusted based on these factors.
Commercial real estate owned by the company will often have appraisals attached to the bridge loan requirement. The interest rate on term financing will often be lower, but again, it is subject to collateral and credit.
Case Study:
When a commercial property firm identified a prime commercial property in downtown Toronto, traditional lenders quoted 90 days for approval. Using a commercial bridge loan, they secured $5 million in just 7 days, enabling them to close the deal ahead of competitors. The property's value increased by 15% within six months, allowing it to refinance with a traditional lender at better terms.
The property's appreciation and secured rental income offset the bridge loan's slightly higher interest rate.
KEY TAKEAWAYS
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Quick Funding Speed represents the primary advantage of bridge loans, enabling rapid capital access within days.
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Collateral Requirements focus primarily on the asset’s value rather than extensive business history.
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Exit Strategy Planning determines loan approval more than traditional credit metrics.
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Interest Rate Structure typically combines higher rates with shorter terms for overall cost management.
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Loan-to-value ratios generally range from 65-75%, defining the maximum available funding.
CONCLUSION
Bridge financing delivers working capital and cash flow when you need it most. Bridge loans can also be used for tenant improvements, making them a versatile financing option.
Are you looking to ‘triumph’ via bridge loans and asset monetization?
Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with your commercial finance loan terms customized to your needs.
FAQ
When should a business consider a commercial bridge loan?
Bridge loans become essential when facing time-sensitive property acquisitions, renovation needs, or urgent business opportunities requiring quick capital access. They serve as interim financing for borrowing money until permanent funding is secured.
How quickly can a commercial bridge loan be funded?
Funding typically occurs within 30 business days, depending on property documentation and borrower qualifications. This rapid timeline contrasts sharply with traditional commercial loans that often take 60-90 days.
What makes commercial bridge loans faster than traditional financing? Streamlined underwriting processes focus primarily on asset value and exit strategy, enabling funding within 5-15 days.
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Less documentation required
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Faster property evaluation
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Simplified approval process
How do bridge loans help secure better permanent financing? Bridge loans provide time to arrange optimal long-term financing while maintaining business momentum.
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Strengthens negotiating position
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Demonstrates project viability
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Allows time for proper permanent loan structuring
What types of businesses benefit most from bridge loans? Businesses facing time-sensitive opportunities or requiring quick capital for growth benefit most.
What happens if I can’t refinance at the end of the bridge loan term?
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Extension options often available
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Lenders typically work with borrowers on exit strategies
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Alternative refinancing sources can be explored
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Backup exit plans should be established early
How do bridge loan interest rates compare to traditional loans?
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Rates typically range from 7-12% annually
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Points may be charged upfront
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Total cost consideration should include shorter term benefit
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Rate structure often includes monthly interest-only payments
How does the bridge loan underwriting process differ from traditional loans?
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Focus on asset value over credit history
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Emphasis on exit strategy
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Faster property evaluation process
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Simplified documentation requirements
What role does property type play in bridge loan approval?
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Different LTV ratios by property type
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Some property types preferred by specific lenders
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Property condition impacts terms
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Location significance varies by lender
