What Is An ERC Bridge Loan?
ERC bridge loans provide quick access to ERC funds without waiting on the IRS. See if you qualify, and find out how to receive your ERC bridge loan to improve your business cash flow.
For businesses that qualify, the Employee Retention Credit has the potential to put thousands of dollars back into the pockets of business owners. Unfortunately, a long processing period combined with a pause on new ERC claims through the end of 2023 has delayed funding for thousands of qualified businesses.
However, there is a way to access ERC funds more quickly: through an ERC bridge loan. In this post, we’ll break down what an ERC bridge loan is, who qualifies, and how to get yours.
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What Is An ERC Bridge Loan?
An ERC bridge loan is a short-term loan that is used to “bridge” the cash flow gap between the time a person applies for the Employee Retention Credit and when their refund is received months later.
An ERC bridge loan lender provides the borrower with an agreed-upon lump sum of cash based on the amount of the borrower’s anticipated ERC refund. Though this amount varies, it’s typically at least 60% of the ERC amount (for example, a person receiving a $100,000 ERC refund may be able to borrow up to $60,000).
The loan is repaid over time through regular payments, along with interest or borrowing fees changed by the lender. In most cases, the borrower will continue to make payments on the loan until the refund is received, at which point they can repay the balance of the loan with a final balloon payment.
ERC Bridge Loans VS ERC Advances
ERC bridge loans are actual loans — they are repaid over time with interest and/or fees. Once an ERC refund is received and the balance of the loan is paid off, the remaining ERC funds are the borrower’s to keep.
ERC advances (also known as ERC buyouts) are quite different. Instead of providing a loan, an ERC company purchases the ERC refund at a discounted rate. For example, a company may offer to purchase a $10,000 refund for 95% of the value. This means that you’ll be given $9,500 upfront, and once the refund check is received, it will be given to the ERC company. There are no monthly payments, no interest, and no additional fees.
It is important to note that some companies use the terms “ERC loans” and “ERC advances” interchangeably. Make sure that you understand all terms, conditions, and fees before agreeing to any type of ERC funding.
Advantages & Disadvantages Of ERC Bridge Loans
Thinking about getting an ERC bridge loan? Here’s how this funding could benefit you:
- No waiting for the IRS: ERC refunds take months — or even a year or longer — to receive from the IRS. Instead of waiting by your mailbox for a refund check, you may be able to receive your funds in as little as a few business days.
- Fast access to cash: An ERC bridge loan gives you fast access to cash that can be reinvested in your business or used any way you choose.
- May be easier to obtain than traditional loans: Many loans have strict requirements (i.e., a specific length of time in operations and a high credit score), while some ERC lenders have very few requirements to qualify for funding.
You can’t make a financial decision without also considering the drawbacks. Here are the disadvantages of ERC bridge loans:
- Fees & interest: You’ll lose money paying fees and interest on your loan as opposed to waiting for your refund.
- May not qualify: While some ERC bridge loans are easier to qualify for than traditional loans, some lenders may have additional requirements that must be met to receive a loan.
How To Qualify For An ERC Bridge Loan
The requirements to qualify for an ERC bridge loan vary by lender. However, to receive an ERC bridge loan, you must qualify for and have claimed your ERC refund. Proof of ERC claim submission to the IRS will be required before receiving an ERC bridge loan.
Depending on the lender, you may need to meet additional requirements, including:
- A minimum or maximum ERC refund amount (i.e., you must have a refund of at least $25,000)
- A minimum time in business
- A good personal and/or business credit score
If you don’t qualify for an ERC bridge loan, you may want to consider an ERC advance, which typically has fewer requirements.
Where To Get An ERC Bridge Loan
There are a few ERC companies that offer ERC bridge loans. One of our favorites is Omega Funding Solutions, which provides 12-month ERC bridge loans of up to 60% of your anticipated refund amount. To get started, all you need is proof of your valid ERC claim. New clients may receive funding in as little as 45 days, while clients who filed with Omega can receive funds in as little as 10 days.
If you used an ERC company to file your claim, you can also reach out directly to them to learn about the options available to you.
Finally, you can check out our list of the best ERC loans, bridge loans, and advances to find a funding option that works best for you. And if you haven’t yet claimed your ERC, start your search for a reputable provider with our list of the best ERC companies.