Bridge Financing (also called a Bridge Loan or Bridge Round) is a short-term funding solution used by companies to cover immediate cash needs until they can secure permanent financing or resolve a liquidity event—such as a long-term loan, investment round, or IPO.
It is called a "bridge" because it fills the gap between two financing events.
Before a larger funding round
Startups often raise bridge funding to maintain operations until the next equity round.
Before an IPO
Companies may raise funds to meet pre-listing expenses or boost working capital.
During M&A deals
Buyers may use bridge loans to quickly fund an acquisition while arranging longer-term financing.
To manage cash flow gaps
Companies with delayed receivables or seasonal business may use it to stay afloat.
Type | Description |
---|---|
Debt Bridge Loan | A short-term loan with fixed interest and repayment terms. |
Convertible Bridge Note | A loan that converts into equity during the next funding round. |
Equity Bridge Financing | Investors provide capital now for equity at a discounted price in a future round. |
A startup expects to raise ₹10 crore in Series A funding in 6 months but needs ₹1 crore now to pay salaries and vendors. It raises a bridge round of ₹1 crore from existing investors via a convertible note—which will later convert into Series A shares at a 20% discount.