Bridge Financing
Central State Financial LTD has a unique expertise to source corporate debt that can carry a corporation with interim financing through a short-term period (typically a few weeks to several months) before a greater debt or equity funding event is set to occur.
Central State Financial LTD generally sources and structures its bridge loans on the basis of the intended use of the proposed financing. We also compare proposed bridge loan structures to other financing operations to verify that clients get the best options to carry them to a subsequent funding event.
The majority of bridge loan structures that we have provided fall into one of three categories:
Short Term Working Capital
Bridge loans that carry a corporation through a few weeks or months often carry higher interest rates and more lender-friendly terms. Accordingly, most corporations use short-term bridge loans only as a last resort financing tool and only when replacement financing is immediately pending and assured. We advise clients in these positions to consider all alternatives, including equity and securities lending transactions, and we consult with our clients to locate other immediately available sources of liquidity before committing to short term bridge loans. In many situations, our analysis and advice will provide valuable insights to corporate clients on striking the best balance between high cost short-term bridge financing and sourcing capital through alternative means.
Pre-IPO Bridge Financing
The final timing of an IPO or other financing event is often out of synch with a corporation’s need to finance its near-term operations. IPO and funding event costs and expenses can also place an excess strain on corporate finances that can threaten operations in the critical period immediately before an IPO launches. Central State Financial LTD serves a valuable role in these periods as a consultant and advisor to source and negotiate bridge loans. Our extensive network of affiliations with investment, commercial, and merchant banks, hedge and private equity funds, and other private investors on the international stage give us rapid access to financing sources that corporations can easily tap. Our relationships and reputation in the financing industry also helps to reduce demands imposed by some lending sources for access to larger blocks of IPO equities. We negotiate aggressively on behalf of our clients so that the near-term pendency of a definite subsequent funding event facilitates more favorable bridge loan terms with lower interest costs. Our structures give lenders greater assurances of repayment from funds that are secured when an equity funding round closes, while allowing our clients to realize a larger share of the undiscounted price of IPO shares that are placed into the market.
Commercial Real Estate Bridge Loans
Commercial real estate is experiencing one of the most substantial periods of disruption that any industry has seen within the past two centuries as more corporate entities are forming virtual offices and developing systems to allow employees to work remotely. Corporations are slowly realizing that these disruptions are creating substantial opportunities either to refinance existing real estate loans or to use bridge financing to acquire and improve commercial real estate at a deep discount. Central State Financial LTD real estate advisors and research specialists work with clients to develop realistic valuations for vacant or distressed property, to create profiles for internal rates of return driven by improvements or new construction, and to identify markets for commercial real estate that are poised for substantial growth. We compare the costs of bridge financing and more traditional commercial mortgages and negotiate terms and conditions that enable our clients to realize genuine value from purchases that are financed with bridge loans.
The majority of bridge loan structures that we have provided fall into one of three categories:
Central State Financial LTD has imbued the same philosophy into all of its services: the recommendations and solutions we offer must first and foremost serve the client’s needs. Corporations that approach us for bridge financing services get our absolute assurances that the solutions we recommend will be the best possible match for their business model and plans for growth and expansion. This client-focused approach further guarantees that bridge loans are sourced and closed quickly and efficiently to minimize client costs and to avoid stresses and disruptions on business operations the corporation’s regular funding is drawn down. This process provides maximum protection for a client’s capital and cash flow with terms and conditions that might include:
- interest-only loans that defer principal repayments until a future financing event is closed and fully funded
- the lowest possible interest rates where liquid assets are available to secure the bridge loan
- a neutral or positive impact on a corporation’s credit profile, which opens more favorable second and third financings
- bridge financing that anticipates undeveloped corporate strategies, with reliance on the quality and experience of management
- favorable prepayment terms and conditions, with few or no penalties and no restrictions or lockouts on prepayments
- non-recourse bridge financing options with no cross-collateralizations or impacts on other loan facilities
- rapid administration and closing of loans, with most closings and fundings happening less than thirty days after an application is completed
- preferable loan application fees that can be drawn from loan principal when funding occurs
- no holdbacks for prepayment of interest
- internal underwriting processes that give favorable preferences to Central State Financial LTD clients
- plain language documentation and streamlined virtual closing processes with electronic exchanges of documents
We appreciate that a client’s exit strategy from a bridge loan must be considered as part of the overall bridge loan funding process. We structure bridge loan facilities such that the client experiences no adverse consequences upon exit by developing clear and concise roadmaps for the administration of the bridge loan from funding through termination.