If you need capital for your business, knowing the basics of each financing alternative can make a big difference. That’s why today we take a detailed look at the differences between bridge loans and conventional loans to help you figure out which one makes sense for you.
What Is a Bridge Loan?
Before we delve into the differences between bridge loans and conventional loans, let’s answer a more basic question: What is a bridge loan, exactly?
A bridge loan is a form of short-term loan that borrowers use to cover their immediate cash flow needs while they secure more permanent financing.
One of the most common ways to use this type of loan is when a homeowner wants to buy a home before selling the one they currently own. In the world of business, bridge loans come in handy in time-sensitive situations where paying upfront can help you secure a good discount.
What Is a Conventional Loan?
Conventional loans are loans provided by private financial institutions such as banks and credit unions.
In the realm of business financing, a conventional loan can be used for a variety of purposes, including but not limited to:
- Purchase commercial real estate
- Equipment financing
- Cover business expenses
- Debt consolidation
- Working capital
Conventional loans work like your typical loan: a financial institution gives you an agreed-upon amount of money which you are required to repay, usually in monthly installments.
In general, conventional loans feature long repayment terms, ranging from 10 to 30 years.
Bridge Loan vs Conventional Loan: What Is the Difference?
So, what are the differences between bridge loans and conventional loans? Here’s what you need to know:
- Since bridge loans are designed for time-sensitive situations, repayment terms are short (usually from six months to a year)
- Conventional loans, on the other hand, have significantly longer terms (10 to 30 years)
- Compared to conventional loans, bridge loans are usually faster in all respects, including approval, processing, and funding
- The swiftness of bridge loans comes at a cost. Interest rates for bridge loans can be higher compared to other financing solutions, including conventional loans.
To learn more about bridge loans, check out our previous post “Bridge Loans: the Pros and Cons.”
Looking for a Bridge Loan or Conventional Loan? Gellyfish Commercial Can Help
Gellyfish Commercial offers efficiency and certainty of execution across a full range of business financing options from bridge loans to conventional loans, SBA loans, and beyond.
Contact us today by email (email@example.com), telephone (877-800-4493), social media (Facebook, Twitter, LinkedIn), or tap the chat icon on our homepage to schedule a free consultation or to learn more about our financing solutions.