Bridge financing

Bridge financing covers a gap in time. BDC describes it as short-term funding that helps a company meet immediate needs while it prepares for a larger, long-term financing, and gives the example of bridging the purchase of one property while the sale of another closes. It can be debt or equity.

What the sources say about cost and eligibility

BDC says bridge financing often comes with higher interest rates than traditional loans because it is riskier. The federal Canada Small Business Financing Program guidelines, in their rule on expenditures a lender already financed on a conventional term loan, say bridge financing is not considered a term loan. For a buyer who is also selling, the guide to financing a business acquisition shows where short-term funding sits among the other options.

What to check or ask

• What event repays the bridge, and by when
• What happens if the permanent financing or the sale proceeds arrive late; see what happens if my financing falls through
• What security and personal guarantees the lender requires