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One can define bridge financing as the temporary financing solution that an a particular organization can adopt so as to sustain their financial needs temporarily before they can be in a position to get a long term solution for their financial status in the organization.
There are a number of financial institutions that are in a position to offer short term financial help to companies before they are in a position to find a long term solution and some of these financial organizations include venture capital companies and also investment banks.
When an organization decides to take up bridge financing with a particular financing company so as to offer a short term financial solution for the organization the money that is offered by the financial institution is given to the organization as a loan and in some cases as 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.
A majority of companies that are being established are not in a position to have enough capital to finance their business and these are some of the instances where the company can organize for bridge financing when having vision of profiting after the investment. 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.
When a company doesn’t take interest in obtaining a bridge loan as a result of the high interest rates that is majorly charged in bridge loan then a company can then adopt equity bridge financing when in need of a short term financial plan. When a company is in need of the equity bridge financing the company will then contact venture capital institution so as they can be able to provide the company with the capital that they are in need of and this is achieved by the company selling part of its equity ownership to the venture capital institution.
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