Bridge Financing

Short horizon capital used to cover a defined gap where the exit is already identified.

Horizon: Short and defined
Requires: A documented exit
Common in: Real estate transitions and acquisitions

Bridge financing solves a timing problem where both ends are known. Something is going to happen, it has not happened yet, and the business needs capital in the meantime. A property is under contract. A longer term facility is in process. A large settlement or contract payment is scheduled.

The defining feature is the exit. A bridge without a credible source of repayment is not a bridge, and that distinction should be settled before anything else in the conversation.

A typical situation

A practice closing on a new suite needs capital for deposits and build out before longer term arrangements are finalized.

When this usually comes up

A longer term arrangement is in process but not yet complete
A property or asset sale is under contract
A large contract payment is scheduled but not yet received
An acquisition timeline requires funds before permanent financing closes
A defined event will resolve the gap on a known timeline

Common uses

Deposits and closing costs during a transition
Carrying operations while a longer process completes
Time sensitive purchases with a known payoff source
Covering a scheduled obligation ahead of an expected receipt

What gets reviewed

Review varies by request. In general, the items below carry the most weight in this category, and having them ready shortens the conversation considerably.

01Documentation of the expected exit event
02Timeline and likelihood of that event completing
03Business bank statements and current obligations
04Collateral or assets involved, where applicable
05Time in business and revenue history

Before you commit

Test the exit before you take the bridge

Ask what happens if the closing slips by sixty days. If the answer is uncomfortable, the timeline or the amount should be reconsidered before anything is signed.

Short horizon capital is priced accordingly

Speed and short duration carry cost. Comparing that cost against the value of not missing the opportunity is the honest way to evaluate it.

Keep the paperwork current

Purchase agreements, term sheets, and correspondence that show the exit is real move the process along considerably.

Often a fit when

Defined short term gaps with a documented and credible exit.

Usually not the right tool when

Ongoing operating shortfalls with no identified repayment event.

Questions about bridge financing