The role of the bridge loan
A bridge loan is a short-term facility, typically 6–18 months, intended to be repaid from an identified future cash event: an equity issue, an acquisition, an asset sale or a refinancing. The tenor must match the repayment event — a bridge without a clear exit becomes expensive real estate on the balance sheet.
Mezzanine as a bridge between debt and equity
Mezzanine sits subordinated to bank debt and senior to equity. It is often combined with a warrant or equity kicker giving the lender upside on success. The coupon is typically 8–14 per cent — cheaper than equity but clearly more expensive than senior bank debt.
Structure and risk
Both bridge loans and mezzanine require a credible exit plan. Without one, repayment risk rises and pricing follows. A thorough cash-flow model with sensitivity analysis is standard in every dialogue with lenders in this segment.
- The bridge loan's tenor must match the repayment event.
- Mezzanine combines a coupon with potential upside.
- Alternative financing is more expensive — but it protects momentum and ownership.
- A credible exit plan is the precondition for reasonable pricing.
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