A loan used to bridge an equity round, which typically has a duration of under one year and some warrants attached.
- 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
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.
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.
Establishment Fees: 2%-3%
Interest Rate: 10-15%
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.