What is bridge financing?

Bridge financing normally comes from an investment bank or venture capital firm in the form of a loan or equity investment. Bridge financing is also used for initial public offerings (IPO) or may include an equity-for-capital exchange instead of a loan. Bridge financing can take the form of debt or equity and can be used during an IPO.

When should a business use a bridge loan?

Businesses turn to bridge loans when they are waiting for long-term financing and need money to cover expenses in the interim. For example, imagine a company is doing a round of equity financing expected to close in six months.

Are bridge loans expensive?

Bridge loans are expensive, given the risks associated with such types of loans. Equity bridge financing represents an exchange of capital from the lender’s side for an equity stake in a company from the borrower’s side. How Does Bridge Financing Work?

What is a bridge loan example?

Bridge loans provide short-term cash flow. For example, a homeowner can use a bridge loan to purchase a new home before selling their existing one. What are the cons of bridge loans?