Interim financing: short-term financing options
Financing has a central importance for companies. Without sufficient money, the business comes to a standstill. Sometimes, however, short-term financing is necessary because, for example, planned income is not immediately available. In such cases, interim financing can help to create liquidity.
Interim financing is a form of short-term financing. This is a loan that is usually taken out for a period of a few weeks to a year. As a rule, interim financing is used in construction financing when owners want to make a purchase, but the money from the sale of the old property is not yet available.
The advantages of bridge financing are obvious: it offers a fast, flexible financing option and can help businesses meet unforeseen expenses. Read more in our article about how interim financing can help bridge financial bottlenecks and maintain business continuity.
What is bridging finance?
In business, there are often situations where you only need short-term financing. Here, interim financing is a good choice. Interim financing is a financing option intended for companies or private individuals who need short-term financing. This may be the case, for example, when buying a property or starting a business.
Interim financing has the advantage that it can be applied for quickly and easily. The term of interim financing is usually very short, often just a few months. During this time, the money must be repaid – either through long-term financing or the sale of assets. Interim financing is often used to bridge a transitional period.
There are different types of interim financing, such as bridging loans or overdraft facilities. Terms and interest rates can vary widely depending on the provider. It is therefore important to find out exactly about the various offers and make a comparison.
- Advantages of interim financing: quick and uncomplicated application, short-term term
- Disadvantages of interim financing: high interest rates and costs
It is important to carefully consider whether interim financing is the right choice and whether you will be able to repay the borrowed money. If unsure, seek advice from a financial advisor in advance.
The advantages of interim financing
Sometimes you need to apply for financing urgently, but do not have enough equity yet. In such cases, temporary financing can be useful.
The advantages of bridge financing are as follows:
- Access to liquidity: the borrower can get quick access to liquidity, which in some cases is absolutely necessary to successfully complete a project.
- Flexibility: bridging finance often comes with higher interest rates, but at the same time it is very flexible. They allow you to repay the loan quickly without having to commit to a long-term loan agreement.
- Short term: bridging finance has a short term, which allows the borrower to access equity quickly without having to make a long-term commitment.
The main reasons why interim financing can be useful are as follows:
- The borrower needs money quickly. For this purpose, interim financing offers a quick and inexpensive solution.
- The borrower does not want to be tied to a long-term loan agreement for a long time and only needs the money for a short period of time.
- The borrower wants to complete a project before he has been able to raise sufficient equity capital.
Incidentally, it is advisable to seek advice in advance from credit brokers and financial institutions that offer interim financing.
How interim financing works
If you need short-term financing, interim financing can be a suitable option. This type of loan is usually granted for a period of 12 to 24 months and is ideal if you want to buy or renovate a property but have not yet obtained a permanent loan.
The conditions of interim financing depend on various factors, such as the amount of the loan, the term and the value of the property to be financed. However, you will usually have to pay a higher interest rate and fees than with a long-term loan.
To obtain interim financing, you can contact a bank or a private lender. Typically, you will need to put up collateral such as a property as a pledge to obtain the loan.
Bridge financing can be an ideal option if you need short-term financing. However, it is important to carefully review the terms of the loan and make sure you will be able to repay it in full before deciding to do so.
Why interim financing is worthwhile?
In certain situations, bridge financing can be a good option. This refers to financing that is only used for a short period of time and can therefore be repaid quickly. The advantage is that you create additional financial leeway during this period.
Interim financing can be useful for companies, for example, if an order is pending that requires a high level of up-front expenditure or if liquidity bottlenecks need to be compensated for in the short term. But private individuals can also benefit from such financing, for example if one is planning a major renovation or has unexpected costs due to an illness or accident.
Another strength of interim financing is that it can often be handled quickly and easily. This is especially important when you need to act quickly. In addition, favorable conditions can often be agreed upon.
- Conclusion: interim financing can be a sensible solution in many situations. It creates financial leeway for a short time, can often be handled quickly and easily, and can be arranged at favorable conditions.