Bridge financing is short-term funding used to cover a defined gap between now and a known future event, such as an asset sale closing, long-term financing being secured, or a receivable being collected.
The defining characteristic of bridge financing is its temporary nature. It is not a permanent capital solution. It exists to carry the business across a specific interval where capital is required but the long-term source is not yet available.
Common scenarios include a real estate transaction where a purchase must close before sale proceeds are received, a business acquisition where committed financing is in process but not yet funded, or a working capital need while a receivables or operating facility is being put in place.
Bridge financing is almost always more expensive than conventional debt. The lender is taking on timing risk, often with limited duration to recover capital, and in some cases with subordinated or interim security. The cost reflects that risk.
From a planning perspective, bridge financing only works when there is a clearly defined exit, a closing date, a refinancing, or a collection event that will repay it. Used deliberately, it solves a timing constraint. Used to cover an ongoing cash flow shortfall, it becomes a recurring, high-cost layer of debt that compounds the underlying problem.
See also: Mezzanine Financing · Working Capital Facility · Cash Flow ForecastBridge financing solves a timing problem, not a structural one. See how Wefinx approaches Virtual CFO services.