Banc Star Financial structures bridge financing options for corporate clients that need interim short-term financing for any period ranging from a few weeks to several months. Bridge financing is an ideal corporate debt solution when a client’s cash burn rate exceeds the amount of working capital on hand, and a permanent debt or equity financing round or other transaction is pending.

Bridge Loan Uses

1. Short Term Working Capital
Because short-term bridge financing often carries higher interest rates, our corporate debt bankers reserve this option for more limited circumstances. A client, for example, might have negotiated long-term multi-million dollar financing that will be closed in multiple tranches, each of which is scheduled to close at defined intervals. When the client perceives that its working capital will be depleted before the closing of a particular tranche, a short-term bridge loan with a term of a few months may be an appropriate solution pending that closing. In this situation, it is critical for a client to balance the downside of higher bridge financing interest rates against other liquidity alternatives, such as equity transactions.
2. Pre-IPO Bridge Financing
Bridge financing is also a useful tool during the pendency of an initial public offering or some other equity issuance event. A pre-IPO bridge loan can be used to pay one-time expenses associated with the IPO, and funds raised in the equity round can then be used to repay the entire bridge loan liability. Banc Star Financial participates as a consultant and advisor in these situations to negotiate bridge loans with investment banks and the underwriting syndicates that are financing the equity round. Investment banks can hold significant negotiating leverage over the terms and conditions of bridge financing and can use that leverage to demand a significant portion of the equity that will be issued in the IPO at a discount from the ultimate issue price. We use our corporate debt and expertise to structure these bridge loans, for example, as forward payments for shares from the pending IPO share issuance, which can enable our clients to realize the full, undiscounted price of those shares.
3. Commercial Real Estate Bridge Loans

Bridge financing is particularly effective for an “acquire and improve” commercial real estate strategy. A developer can use the loan proceeds are to secure vacant or distressed real property pending construction or renovation of rent-generating improvements that will be refinanced when complete. Unlike a pure construction loan, a bridge loan in this situation is secured by an existing asset. The loan might still carry higher interest rates and fees than standard commercial mortgage loans, but they can be easier to negotiate and manage and can be closed more expeditiously.

Banc Star Financial’s corporate debt team frequently sources bridge loans through a network of private lenders and closely-held hedge or investment funds. We use our network of funding sources to help our clients save time and money, and to reduce the transactional risks that are inherent in bridge financing.

Banc Star Financial’s Approach to the Bridge Loan Process

Banc Star Financial fulfills a financial partner role with a goal of structuring and negotiating bridge financing that is a custom fit for a client’s specific objectives. Our client-focused approach formulates targeted bridge loan transactions that are closed with speed and precision to give a client the working capital it needs before a permanent solution is realized. Our advisors and consultants focus bridge loan negotiations on loan elements that have the greatest impact on the client’s capital and cash flow, including:

  • interest-only loans, with principal repayments upon occurrence of a future  financing event;
  • collateralization with liquid assets to reduce interest demands;
  • use of bridge financing to improve a client’s creditworthiness and to open access to other corporate debt options;
  • bridge financing prior to the completion of defined corporate strategies that are not yet fully developed;
  • minimal or no prepayment penalties, or favorable repayment lockout terms;
  • recourse or non-recourse bridge financing, and preferred cross-collateralization terms and conditions with other loan facilities;
  • bridge loan closings within ten to thirty days of term sheet negotiation;
  • avoidance of principal holdbacks for interest payments;
  • aggressive underwriting that is based on the most favorable borrower creditworthiness;
  • reduced documentation requirements and simpler closing obligations.

We place particular emphasis on bridge financing exit strategies and verify that bridge loan documentation includes a clear roadmap for terminating the loan facility with no adverse consequences to the client. Our extensive network of connections with private lenders further strengthens our ability to accomplish these goals for our clients. The private lenders and funds that we use to source corporate debt are less subject to the restrictions and regulations that limit bridge financing options from traditional commercial banks. This gives us the flexibility to assist our clients to close bridge loans with fewer reserve requirements and less complex due diligence.