# Bridge Financing

## Quick Definition

Short-term funding to extend runway until the next equity round or specific milestone.

## What is Bridge Financing?

A bridge loan or note provides capital between funding rounds. It's designed to be temporary, typically 6-18 months, often converting into the next equity round at a discount.

## When to Use Bridges

Bridge when you're close to a milestone that would improve terms, need time to close a round, or face temporary cash crunch. Don't bridge to avoid addressing fundamental problems.

## Bridge Terms

Bridges often convert at 15-25% discount to next round, may have valuation caps, and sometimes include warrants. Existing investors usually provide bridges; new investors rarely do.

### Formula

Common bridge terms:

- Amount: 3-12 months runway  
- Discount: 15-25% to next round  
- Cap: Often 10-20% premium to last round  
- Interest: 5-8% (usually converts)

### Example

Company needs 6 months to hit metrics for Series A.

Current runway: 2 months.

Bridge terms:

- Amount: $500K  
- 20% discount to Series A  
- $8M valuation cap

If Series A is at $10M, bridge converts at $8M (the cap).

## Related Terms

[**Most Favored Nation (MFN)**   
A provision guaranteeing an investor will receive terms at least as favorable as any subsequent investor receives.]

[**Qualified Financing**   
The minimum raise amount that triggers automatic conversion of convertible notes or SAFEs.]

[**Maturity Date**   
The deadline by which a convertible note must be repaid or converted to equity.]

## Learn More About Bridge Financing

[Ecommerce **The 13-Week Cash Flow Forecast for Ecommerce: A Founder's Guide**   
Learn how to build a 13-week cash flow forecast for your ecommerce business. Predict shortfalls, time inventory buys, and stop flying blind on cash.]