Why bridge financing matters to a first-time founder
It can keep payroll or a time-sensitive project moving while committed funds are delayed. The danger is relying on money that may arrive late or not at all. Short terms, fees, interest, security or ownership dilution can make the bridge expensive and weaken the next negotiation.
Examples of bridge financing
A start-up expects a ₦600 million investment to close in ten weeks but has only six weeks of cash. Existing investors offer ₦100 million through a convertible instrument to fund payroll. The founder models a four-month delay, documents what happens if the round fails and obtains legal advice before accepting the terms.
Common misunderstanding
Bridge financing is the broad funding purpose, not one specific product. It may use a loan, convertible instrument or another structure. It is not a cure for a business with no credible next funding source; borrowing against an uncertain hope can simply postpone insolvency while adding obligations.
When to use it
Use it only when the gap, destination and fallback are clear. Confirm the expected funding is genuinely advanced, calculate the full cost and model delays or failure. Compare spending cuts and staged payments first, then have a qualified lawyer and accountant review tax, security and ownership consequences.