Bridge Loan
What is it?
- It is a short-term loan used specifically to bridge the gap in financing between two periods. A bridge loan will often be refinanced by a more long-term loan.
- Bridge loans are typically backed by collateral such as property or other tangible assets.
What to expect?
- Bridge loans usually have a tenor of up to one year with a loanable amount of 60% to 80% of the collateral value.
- Borrowers must be aware of the key metrics that lenders look for before taking on the loan. Some of these key metrics include, but not limited to, the following: D/E ratio D/EBITDA ratio caps (depending on markets).
- Typical bridge loans follow a bullet principal repayment and interest being paid either periodically or rolled over to maturity.
- Bridge loans can require corporate and/or shareholder guarantees.
- Bridge loan lenders are focused on the ability of the company to consistently generate positive cash flow.
Who should consider
- Companies who are looking for short-term financing and a quick application process and approval and are willing to take on high interest rates and origination fees.
- Companies that have free and unencumbered collateral, typically real estate, that can be pledged to the lender.
How Can Bayfront Help
Strategy Review
Detailed analysis of the Client and advise on value-adding corporate strategies.
Structuring
Detailed analysis of the Client’s capital structure and advise on the optimal proportion of equity and debt.
Deal Execution Management
Assisting in execution of deal processes, most commonly in the form of capital raising.
Information Memorandum
For presenting to different target audience such as lenders, new sales relationships, new client relationships.
Governance Review
To determine the specific governance needs of a company and assist in areas which would minimize risks and help achieve business goals.
