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Bridge Over Troubled Water: The in’s and out’s of Bridge Loans
Bridge financing often is perceived to be a viaduct to victory valley when in fact it’s a direct route into the hub of heartache hill. Bridges are designed to extend the capabilitly of a company to facilitate a successful closing of a public offering, acquisition or private placement by filling capital gaps rapidly and efficiently. Bridges are structured with protective covenants, as used by commercial banks and are typically considered "expensive money"; the question then is can your company afford it and what are negotiable elements and what are not? Don’t be caught without the benefit of our collective knowledge of securities and the financial markets or you may find yourself wearing a bulls eye that marks you as an attractive yield for investors and negotiating a cease fire, rather than a savvy ambassador bargaining for most favored nations status. On your way to Wall Street, you hit a road block. There is a problem. While popular wisdom holds that companies can morph operational models at the drop of a hat, that’s not strictly true. The drop of your banker’s three-piece suit, maybe. The point is, moving to the beat of the market takes companies time and a time is something cash strapped companies usually don’t have much of. Many times a “make it ‘til Friday” mentality becomes pervasive only out of necessity. With cash almost gone, finding takers for a Series A or B would be nearly impossible until your new business model is a proven commodity. So what do you do? Is there such a thing as a cash IV pole? If you need a quick infusion of wisdom, you’ve come to the right place. In the vernacular of the Who Wants to Be A Millionaire TV sensation, PubCo White Papers with Stephen Brock at the helm could just be your lifeline. Stephen has worked with companies to get a bank account and helped secure seed capital for a fraction of developmental stage companies (DSC) capitalizations, even though thier track-record-less than that by a long shot. So coming to Brock via PubCo White Papers to learn about options for getting more cash into your coffers is the best place to start. Traditional wisdom tells you “go out for a second round now” but that’s a doubtful sentiment, like a gardener trying to dissuade some new eager beaver homeowner who wants to sod Zoisa in January. Since it’ll probably take you a few months to get your momentum flowing why don’t you look for a bridge? A what? When most people think about a bridge they think about arches and spires or concrete and steel, anything but greenbacks. So the first issue is what does this architectural wonder have to do with helping a small company survive, or said another way, just what is a bridge or bridge financing: DEFINITION: Bridge financing is a type of short-term financing vehicle - usually a loan backed by some structure of equity – that’s used by small companies to pay for operating expenses during either a season between funding rounds or while negotiating or filing for a round of investment. Bridges are loans designed for early stage companies or small sized companies that are moving in the direction of a value-hiking milestone. Value-hiking milestones come in the form of operational events like new product launches or financial channel markers like taking your company public1 or completing a reverse merger2 or closing a private placement. Companies in this situation are so close they can taste the honey being made in the hive and consequently don’t want to sell shares at a valuation that’ll get a kick shortly. In financial terms bridges often take the form of a convertible note3 in which the principal and interest can at the behest of the lender/holder of the note convert to stock upon the completion of the next round... [continued...] Want to know more? Download the White Paper "Bridge Over Troubled Water: The in’s and out’s of Bridge Loans" for just $19.95. |
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