Bridge Loans

A loan used to bridge an equity round, which typically has a duration of under one year and some warrants attached.

Eligibility

- You have an upcoming Series A (or higher) coming up with significant interest, and

- You have already raised in excess of £2mm, and

- You have annualised sales in excess of £1mm

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Purpose

The purpose of a bridge loan is usually to delay an upcoming equity round in order to achieve a higher valuation during the round. 

 

This could be because a major sales contract is about to be signed, or a significant product update or launch is imminent and the fund raising would be better done after these events.

There usually are strong spending covenants tied to a Bridging Loan where the business must stay within strict spending pre-agreed guidelines.  This is done to ensure the upcoming round remains on track. We will hold a fixed and floating charge over the business for the duration of the loan and will usually need to the senior-most lender.

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Timing & Size

Bridging Loan are done ahead of a fund raise - Series A or later.

As this is quasi-equity risk, due diligence is extensive and can take up to a month and we will require access to the data room.

 

We will usually lend up to 10% of the expect size of the Series A funding round.  Note a Bridge Loan can often be rolled into a Venture Debt without incurring a new establishment fee.

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Typical Terms

Establishment Fees: 2%-3%

Interest Rate: 10-15%

Warrant: 10-25%

Duration: Up to 1 year, repaid on fund raise.

Note that the warrants will be struck at the equity fund raise and will remain outstanding once the loan is repaid.