KBLX Weekend Tip! Bridge Loan Funding continued...
Bridge Loan Funding
Emergency Gap funding, Bridge Loans are available for nonprofits in need of short term lending. Bridge Loans are made on a short-term basis in anticipation of guaranteed permanent or long-term funding. They are usually loans made against contract receivables or capital campaign pledges, and they are expected to be repaid as the receivables or pledges are collected. Nonprofit bridge loans usually have low interest.
Line of Credit
It is very important while you are in good standing with your finances with your bank that you implement a Line of Credit. Establish the Line of Credit in healthy financial times and you will be able to weather the bad times with access to the Line of Credit which acts as Bridge Loan funds. Be sure to pay down the line of credit with unrestricted funds (see my Blog on the definition of Unrestricted funds). Renew your Line of Credit annually. Try to establish the largest amount available for the Line of Credit to allow for a good business credit rating. CAUTION - Remember a Line of Credit is not to be used routinely. The purpose is for a “Rainy Day” but as soon as the rain stops and the sun shines, the Line of Credit needs to be restored/repaid. The Line of Credit does 2 things: 1) Creates a strong financial portfolio if used correctly and 2) Gives the nonprofit access to emergency gap funding