How to get a quick bridge funding
Written by: brittanybritney
In practice, even if it is not ideal, loans may end up becoming a necessity for many companies. In this scenario, the most important thing is knowing how to identify the right times and avoid borrowing too high, which jeopardizes business finances and does not provide the expected return. It is critical, therefore, that the manager not only manage the business accounts well but also recognize the windows in which it is really worth making a quick bridge funding to help the company pay off other debts or leverage its growth.
Deciding where to invest
Many entrepreneurs who think of investing money are surrounded by doubts as to the fate of such investments: the company itself or a more formal fixed or variable income financial investment? But before making that decision you need to think hard and evaluate the potential that your own company has to ensure a compensatory return. Borrowing to buy new machines or to provide any other investment in the business requires a careful assessment of the likelihood that the investment will meet expectations. One should therefore calculate the return on investment.
Calculating the return
To make this calculation, first stipulate a deadline to get the return. Then, divide the initial investment (the borrowed loan) by the profit of the period. Profitability should be the most important criterion in this analysis, since it alone will determine the viability or the infeasibility of the investment. It is also necessary to consider the term for payment of debt and the value of interest rates. Therefore, 20 months is the minimum term for return on invested capital.
Financing working capital
The example we have just given illustrates the working capital financing , that is, the loan to invest in resources that streamline the operations of the company. This practice is very common in the corporate world and its procurement is relatively quick and easy without involving too much bureaucracy. One of the main advantages provided by this modality is to make the prepayment of the installments, favoring the discharge in less time and the release of credit for other future loans. Another benefit concerns interest charged, which is also not very high. Therefore, in emergency situations or whenever the company needs to increase its cash flow, working capital financing can be a good alternative.
The quick bridge funding corresponds to a contract entered into with financial institutions through which the customer receives a certain amount and is committed to return it within the agreed term. In this case, money does not need to be earmarked for something specific and is subject to interest rates set by banks. This option requires a great deal of control on the part of the entrepreneurs, so that they know how much of the resource was used in each action to be able to recover the value . One of the advantages is the fact of paying monthly fixed rates, as determined in the contract, and the profit only belongs to the partners. On the other hand, a debt increases the risks of the company in the market, making it more vulnerable.
In addition to loans with banks, there is also the possibility of getting the money with family and friends, who may even offer better conditions. But care must be taken not to ruin the relationship with the person, since this type of resource is based on trust. So even if you use this option, make a contract setting out rules, values and anything else that is combined.