What is Bridge Financing?

Bridge finance is a type of short-term financing used to fund a company’s short-term expenses until long-term finance can be acquired. As a result, it is known as bridge financing since it acts as a link between a corporation and debt capital via short-term borrowings.

Bridge Financing refers to procurement of funds for short term duration to quench the immediate requirement of the borrower, till the funds required are not obtained in a more structured manner via a source of choice with long term view in mind.

Bridge Financing normally comes into picture in events like flotation of Schemes, IPOs or urgent procurement of industrial assets wherein funds are procured temporarily initially for short term hence creating a short term liability in the balance sheet and later financing the requisite amount in a structured and permanent manner replacing the STL created above.