The process in which an organization gets financial assistance for a temporary basis so as to be able to take care of some of the financial situation in the organization before the can be able to engage in a long time financial plan can be termed as bridge financing.
Incase an organization is in need of a short term financial assistance before they settle for a long term financial solution there are several organizations that one can contact for the financial solution and some of these institutions include venture capital companies and also investment banks.
When an organization gets into an agreement with a financial institution when they are in need of a short term financial assistance so as to cater for the organizations needs the money that will be handed over to the organization will either be a loan and some instances an equity investment.When a company is in need of bridge financing it means that the finance solution that they will get from a financial institution ought to be able to sustain the company’s needs until the time that the company will be in a position to be able rise and be on its feet.
One of the common instances that is mostly observed when companies take bridge financing is for example when they do not have enough capital to finance the business for as certain period of time and have to get assistance of a financial institution to offer financial solution when in a position to reap profit at the end. One of the options in which an organization can be able to obtain bridge financing for its short term financial needs is a through a bridge loan which indicates that the company can obtain the financial assistance from a financial institution at a high interest.
Organization that are arranging for a bridge loan are always advised to have a well-established financial plan as the interest that they are charged for the bridge loan are in most cases high and could cause a strain in the business.
The other option in which an organization can be able to acquire bridge financing for its short term financial solution is through equity bridge financing and this is a solution that can be picked up by an organization when they choose not to take a debt at high interest from the financial institutions.In equity bridge financing the company that is need of the short term financial solution will then sell part of its equity ownership to the venture capital institution so as to provide the company with the financial need for a particular period of time that they are in agreement with.
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