Bridge Financing

  

Monies required to help the borrower “get from here to there,” where “here” is often “privately held” and “there” is an IPO or similar situation, when money is about to run out, but an infusion is on the horizon.

Larry is the CEO of a software company that is set to raise funds via an IPO in two months. However, he doesn’t have enough money in the bank to pay the associated lawyers’ and bankers’ fees, so he takes out a 60-day loan to pay for those expenses.

Moe gets paid every Friday, but his rent is due this Wednesday, so he asks his landlord for a two-day grace period.

Curly is hungry, but won’t have any money until his Social Security check deposits on Tuesday. He’ll gladly pay you then for a hamburger today.

Larry, Moe, and Curly are all in need of bridge financing.

Related or Semi-related Video

Finance: What is a Surety Bond?0 Views

00:00

Finance allah shmoop What is a surety bond Think sure

00:08

It t like certainty Remember when you were a kid

00:12

at summer camp and had to pony up a buck

00:14

to prove your heavy roller status at friday night's poker

00:17

game And then there was a buddy who promised to

00:20

pay more than that if you lost more than your

00:22

buck Well surety bonds air kind of like that We

00:25

repeat kind of a surety bond is an agreement between

00:28

three parties One party guarantees that a second party will

00:32

fulfil a promise to the third party For example one

00:35

signer might guarantee that a small business will honor a

00:39

government contract That is that small business will have to

00:42

go borrow a whole bunch of money to go build

00:44

a bunch of fence wire stuff for the government that

00:46

they would need somewhere in the south And then some

00:49

bigger contractor would guarantee that that small business will in

00:54

fact perform on the contract If the small business doesn't

00:57

perform the contract like as guaranteed building whatever fencing materials

01:02

and the government wanted to build will the person who

01:04

signed on their behalf would likely have to either pay

01:07

up or build the fence themselves The big guy i

01:09

either guarantor gives the little guy the principal surety in

01:15

delivering the contract to whoever wants it toe happen A

01:18

k a The oblige g remember that song about the

01:22

government there yet oblige E ope elijah Life goes on

01:26

Sorry we're done anyway all the parties involved bond with

01:30

certainty the delivery of whatever product or service that surety

01:34

bond is standing behind So yeah that's what it is 00:01:36.669 --> [endTime] And don't call us surety

Up Next

Finance: What is a Co-signer?
7 Views

What is a Co-signer? A Co-signer is a 3rd party who agrees to also be held liable for a financial obligation in the event that the primary signer d...

Find other enlightening terms in Shmoop Finance Genius Bar(f)