Financing & funding

Bridge Financing

Definition

Short-term funding used to bridge the gap between two financing rounds or before a major milestone. Bridge financing provides immediate capital while you prepare for a larger raise.

In depth
3 sections

What Is Bridge Financing?

Bridge financing is short-term funding used to "bridge" the gap between two events — typically between funding rounds, before a revenue milestone, or while closing a larger deal. It provides immediate capital to sustain operations while you work toward a position to raise on better terms.

Common Types of Bridge Financing

Convertible notes: Short-term debt that converts into equity at the next financing round. The most common bridge instrument.

SAFE notes: Simple agreements for future equity — faster and simpler than convertible notes.

Revenue-based financing: Capital tied to your revenue, repaid as a percentage of monthly revenue. Non-dilutive and well-suited to SaaS businesses with predictable MRR.

When Should You Consider Bridge Financing?

Bridge financing makes sense when you need 3-12 months of runway to hit a milestone that unlocks better terms (e.g., hitting $1M ARR before raising a Series A). It is less ideal as a pattern — if you find yourself repeatedly taking bridge rounds, it may signal that your burn rate is too high relative to growth or that your milestones need recalibrating.
Eligibility

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$500K+Last-year revenue
RecurringSubscription or repeat revenue
HealthyRetention & gross margins
Questions
Bridge Financing

Bridge rounds typically range from $100K to $2M. Convertible note bridges usually carry a 15-25% discount, a valuation cap, 2-8% interest, and 12-24 month maturity. Revenue-based financing bridges are priced differently — typically 1-2x the capital advanced, repaid over 6-24 months from revenue.

It depends on the instrument. Convertible notes and SAFEs are dilutive because they convert into equity. Revenue-based financing and term loans are non-dilutive — you repay capital without giving up ownership. For SaaS founders who want to preserve equity, explore non-dilutive funding options before defaulting to equity-linked bridge instruments.

The main risks are unfavorable conversion terms (low valuation caps set during desperation), stacking too many bridge rounds (compounding dilution), and signaling risk — repeated bridges can suggest to future investors that the company could not raise a full round. Use bridge financing strategically for a specific milestone, not as a recurring lifeline.

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