What are the best ways to structure a bridge loan for start-up fundraising?

1 Why use a bridge loan?

Bridge loans can be useful for start-ups that need to extend their runway, validate their product-market fit, or achieve a key milestone before raising more capital. They can also help you avoid dilution, maintain control, and keep your valuation flexible. However, bridge loans also come with risks and costs. You may have to pay high interest rates, fees, or penalties. You may also have to give up some equity, warrants, or conversion rights. And you may face pressure from your lenders to raise your next round quickly or meet certain conditions.

2 How to find bridge lenders?

Bridge lenders are usually existing or potential investors who have an interest in your start-up. They can be angels, VCs, family offices, or even crowdfunding platforms. To find bridge lenders, you need to network, pitch, and build relationships with them. You need to show them that you have a clear vision, a strong team, and a viable business model. You also need to demonstrate that you have traction, traction, and traction. That means showing them your user growth, revenue, retention, engagement, and feedback.

3 How to choose a bridge loan type?

Bridge loans can be either debt-based or equity-based. Debt-based bridge loans are loans that you have to repay with interest and fees. Equity-based bridge loans are loans that convert into equity at a later stage. The type of bridge loan you choose depends on your situation, goals, and preferences. Debt-based bridge loans may be cheaper and simpler, but they may also limit your cash flow and increase your debt burden. Equity-based bridge loans may be more flexible and aligned with your investors, but they may also dilute your ownership and affect your valuation.

6 How to manage a bridge loan?

Managing a bridge loan is the ongoing process of using your bridge loan wisely and responsibly. It involves monitoring your cash flow, budget, and burn rate. It also involves meeting your milestones, obligations, and expectations. To manage a bridge loan, you need to be strategic, disciplined, and accountable. You need to have a clear plan for how to use your bridge loan, how to measure your results, and how to repay or convert your loan. You need to follow a strict budget, cut unnecessary costs, and optimize your revenue. And you need to keep your lenders informed, engaged, and satisfied.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?