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 Co-signer?7 Views

00:00

Finance a la shmoop what is a cosigner? well it's just this oh wait

00:08

that goes in the trigonometry video people why don't you do this all right [Man discussing trigonometry]

00:13

never mind cosigner it's this... okay all right we're in finance so a cosigner is

00:19

this there we go it's your mom you really wanted that

00:24

condo with the nice view of the park the cool arts district and the local dentist [Dentist office building]

00:29

office nearby for some weird reason but the building owners just didn't trust

00:33

you alone to make the payments yourself which makes sense given that you're a

00:37

part-time barista who takes at least one sick day every week you blame them so [Sick days marked on calendar]

00:42

your condo dream seems a well a bit out of reach luckily for you the bomb

00:48

or Bank of mom came in handy when she co-signed the loan along with you all [Mum signing loan agreement]

00:54

right what does that co-signing mean well it means that you are the first one

00:59

obliged to pay the monthly payments on your loan but if you don't well then the

01:03

Bank of America way bigger than the bank of mom can come after mom and she is

01:09

directly legally obligated to pay the loans that you promised - hey so yeah

01:16

you got your condo dream but mom's living quarters aren't so spacious yeah [Mum laying in a car backseat]

01:21

well you made her co-sign for your deadbeat self hanging her butt up to dry

01:26

and now she's well enjoying the view from her SUV parked on the curb of the [SUV window winds down and Mum appears]

01:31

road outside the dentist hang in there mom you'll get a better

01:35

parking lot slot with a view someday

Up Next

Finance: What is a Surety Bond?
0 Views

A surety bond is an agreement between three parties in which one party guarantees that a second party will fulfill a promise to the third party.

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