Bridge financing is financing used while waiting for an anticipated and reasonably expected inflow of cash. In our case money from sale of project.
Another type of bridge financing is used by companies before their initial public offering, to obtain necessary cash for the maintenance of operations. These funds are usually supplied by the investment bank underwriting the new issue. As payment, the company acquiring the bridge financing will give a number of stock at a discount of the issue price to the underwriters of the issue that equally offsets the loan. This financing is, in essence, an advance payment for the future sale of the new issue.
Bridge financing may also be used by banks underwriting an offering of bonds as an incentive to use their services. If the banks are unsuccessful in selling a company's bonds to qualified institutional buyers, they are typically required to buy the bonds from the issuing company themselves, on terms much less favorable than if they had been successful in finding institutional buyers and acting as pure intermediaries.
There are two types of bridging finance. Closed bridging and Open Bridging.
Closed bridging finance is where you have a date for the exit of the bridging finance and are sure that the bridging finance can be repaid on that date. This is less risky for the lender and thus the fees charged are lower.
Open bridging is higher risk for the lender. This is where the borrower does not have an exact date for the bridging finance exit and may be looking for a buyer of the project.
What the client would be offered is a situation where the injection of capital would be invested with a target date of sale.
You have been turned down for loans from mortgage companies, banks and other traditional financing sources.
Here is a small list of the type of situations where we can offer hard money.
(1) Lack of capital to complete a good project.
(2) Renovations needed before a sale can take place.
(3) An estate needs to pay out one or more of the beneficiaries prior to sale.
(4) Tax or other obligations need to be met before renovations and sale can take place.