Bridge Financing Options

Common bridge sources

Bank line of credit: cheapest option if pre-existing. Drawing on an established line typically takes 1-3 days. Personal funds from owners: simplest but creates entanglement and can complicate future raises. Friends and family: convenient but risks relationship damage. SBA Express (up to \$500K, 36-72 hour approval at preferred lenders).

More expensive options: invoice factoring (1-5%/month, days to fund), MCA (60-200% APR, hours to fund), revenue-based financing (typically 1.3-1.6x repayment, weeks to fund). Convertible notes from existing investors are common in venture-backed bridges.

Choosing the right bridge

The right bridge has three properties: (1) the cost is justified by the certainty of the bridging event, (2) the term matches the bridge length (don't take a 12-month MCA to bridge a 6-week gap), (3) the structure doesn't compromise future financing.

MCAs and similar high-cost financing often look attractive in a panic but their daily debits create their own crunch. Many businesses that take a single MCA end up taking a second to service the first — debt-stacking that ends in restructuring or closure. Talk to a small-business attorney before signing anything that auto-debits your bank account daily.

Sequencing the conversations

When cash is genuinely tight, the right sequence is existing investors first, existing lenders second, new lenders third, customers fourth, and equity dilution last. Existing investors and lenders already understand the business and can move fastest; new lenders take 60-90 days even in good circumstances; customer prepayment requires negotiation but preserves the cap table; new equity is dilutive and slow.

Insider bridges from existing investors are typically structured as convertible notes or SAFEs with a discount and cap on conversion at the next priced round. The terms get worse the more desperate the company looks; starting the conversation 6 months before the cash runs out gets dramatically better terms than starting 6 weeks before.

Customer prepayment is the most underused source of bridge cash for B2B businesses with strong customer relationships. A multi-year customer with confidence in your future will often agree to prepay 6-12 months of services in exchange for a 10-15% discount — the customer gets meaningful savings, you get genuinely free working capital, and the conversation strengthens rather than damages the relationship if handled with transparency.

Document any insider financing carefully. Friends-and-family loans, founder personal advances, and informal investor bridges all need written notes with clear terms; cleanup at the next priced round is far harder if these obligations weren't documented properly. The standard structure is a convertible note with discount and cap, even when the lender is your aunt.