Structured Debt Facilities & Bridge Capital
Need capital before refinancing, an acquisition, or a major payment? Explore structured debt facilities, bridge financing, and an indicative term sheet.
Structured Debt Facilities and Bridge Capital: Financing Around the Transaction
Structured debt advisory
An acquisition closes before permanent financing is ready. A contract requires spending before the customer pays. An asset needs investment before it qualifies for long-term debt.
Structured debt facilities can address these timing gaps by aligning funding, collateral, and repayment with the underlying transaction. Bridge capital provides temporary liquidity while a defined exit is completed.
The starting point is the repayment source. Before discussing facility size or pricing, a borrower needs to explain what generates the cash to repay the lender, when that cash becomes available, and what happens if the expected timeline slips.
What Is a Structured Debt Facility?
A structured debt facility is financing tailored to a borrower’s cash flows, assets, contractual rights, and transaction requirements. Its terms determine how capital is drawn, where proceeds can be used, which assets support the exposure, and how collections repay the debt.
A facility can combine a term loan, a revolving working capital line, and delayed draws for approved expenditures. Separate tranches may carry different maturities, collateral rights, or repayment priorities. Where several creditors are involved, their rights must work together.
Financely’s transaction structuring and capital placement services support the development of financing structures around these requirements, including bridge and subordinated debt mandates.
Where Bridge Capital Fits
Bridge capital finances an interim period before a specified repayment event. That event may be a longer-term refinancing, an asset sale, a committed equity contribution, or collection of identifiable receivables.
Acquisition bridge
Funds part of a purchase while permanent debt or another identified source of capital is completed. The structure needs sufficient liquidity for the acquired business after closing, as well as a credible refinancing plan.
Contract and receivables bridge
Finances expenditure before an eligible customer payment arrives. Underwriting examines performance obligations, payment conditions, counterparty credit, and the lender’s ability to receive the resulting cash.
Asset transition bridge
Supports improvements, repositioning, or another defined transition before an asset is sold or refinanced. Drawdowns can be tied to budgets, verified expenditure, and completion milestones.
Refinancing bridge
Repays an existing facility while replacement financing is finalized. The borrower must demonstrate why the replacement is achievable and how any shortfall will be covered.
For buyers, bridge financing should be assessed within the full business acquisition financing structure, including sponsor equity, seller financing, existing debt, and post-closing working capital.
A bridge needs an exit that can withstand scrutiny. “We will refinance later” is an assumption. A supported exit identifies the prospective financing source, its underwriting requirements, the milestones still outstanding, and a fallback if proceeds arrive late or fall short.
How the Facility Is Structured
Size the debt to repayment capacity
The funding request should reconcile to a detailed sources-and-uses schedule. Capacity then depends on the repayment case: sustainable cash flow for a corporate loan, eligible collateral for an asset-based line, or realizable proceeds from a defined transaction.
Match drawings to the use of funds
A term loan may suit a purchase at closing. A delayed-draw facility can fund approved expenditures over time. A revolving line can support recurring working capital needs, subject to availability tests and the facility’s redraw provisions.
Define collateral and cash control
Security may include receivables, inventory, equipment, real estate, shares, or designated accounts. Existing liens, transfer restrictions, jurisdiction, and enforcement requirements affect what a lender can rely on.
For asset-based facilities, availability may be limited by a borrowing base calculated from eligible collateral, advance rates, and reserves. The OCC’s asset-based lending guidance identifies borrowing-base construction, collateral controls, and monitoring as central underwriting considerations.
Build the exit into the original structure
Repayment milestones should begin well before maturity. The model should test delayed refinancing, lower asset-sale proceeds, weaker operating performance, and the additional interest expense associated with a longer holding period.
The OCC’s guidance on refinance risk reinforces the importance of assessing a borrower’s ability to replace maturing debt. A lender’s willingness to refinance cannot be assumed simply because the current loan remains performing.
Short Indicative Term Sheet: Secured Bridge Facility
The example below illustrates a proposed structure for a revenue-generating company funding an acquisition. All figures are hypothetical negotiating assumptions, not prevailing market terms, a Financely financing offer, or a lender commitment.
| Term | Illustrative proposal |
|---|---|
| Borrower / purpose | Acquisition vehicle supported by an operating group; acquisition consideration and approved transaction costs. |
| Facility | USD 5,000,000 senior secured, non-revolving bridge loan; single draw at closing. |
| Sponsor contribution | At least USD 2,000,000 cash equity, funded before or alongside the loan. Sponsor covers any remaining funding gap. |
| Tenor | 12 months from drawdown. Any extension requires separate lender approval. |
| Interest / fees | 12% fixed annual cash interest, payable monthly; 2% lender arrangement fee at closing. Legal, diligence, and advisory costs additional. |
| Security | Proposed first-ranking security over agreed assets and accounts, share pledges, and agreed group guarantees, subject to legal review and existing creditor arrangements. |
| Repayment | Principal due at maturity, with mandatory prepayment from agreed disposal and refinancing proceeds. Voluntary prepayment permitted without premium in this example. |
| Covenants / reporting | Minimum unrestricted cash of USD 500,000; monthly management accounts; restrictions on additional debt and distributions; quarterly refinancing progress reports. |
| Conditions to funding | Satisfactory diligence, lender credit approval, verified equity, executed acquisition documents, required consents, definitive loan documents, and security perfection. |
| Primary exit | Long-term refinancing targeted by month nine; sponsor-supported deleveraging plan if replacement debt is insufficient. |
Illustrative and non-binding throughout. Actual economics, leverage, security, covenants, and timing depend on the borrower, jurisdiction, collateral, lender requirements, and diligence findings.
Compare Total Cost and Usable Proceeds
In the example, a fully drawn USD 5 million loan costs USD 600,000 in interest over 12 months, plus a USD 100,000 arrangement fee. That is USD 700,000 before legal, diligence, advisory, and other costs, assuming no principal reduction.
If the arrangement fee is deducted from the advance, cash received falls to USD 4.9 million while the initial principal remains USD 5 million. The sources-and-uses schedule must account for that difference.
Compare competing proposals on net proceeds, cash interest, amortization, reserves, prepayment charges, and extension terms. A lower headline rate can still leave a borrower with less usable liquidity or a more restrictive repayment schedule.
From Financing Requirement to Funding
- Submit the transaction. Provide the funding amount, use of proceeds, financial statements, existing debt, available collateral, and proposed repayment source.
- Agree the mandate and prepare the credit case. Complete the engagement and retainer, then develop the structure, financial model, and lender materials.
- Run lender outreach and assess terms. Approach relevant capital providers and compare written proposals across pricing, security, covenants, and execution conditions.
- Complete underwriting and closing. Coordinate lender diligence, documentation, and funding conditions. Disbursement follows lender approval and satisfaction of the agreed requirements.
Frequently Asked Questions
Is structured debt the same as bridge financing?
No. Structured debt describes how a facility is designed. Bridge financing describes its temporary purpose and expected exit. A bridge can be a structured debt facility, while a structured facility can also provide long-term financing.
Can a signed contract support bridge capital?
Potentially. A lender will assess the customer, payment obligations, remaining performance requirements, assignment rights, and collection controls. A signed contract alone does not establish financeability.
Can interest be paid at maturity?
Some facilities permit accrued or capitalized interest. This reduces current cash payments but increases the amount that must be repaid. The exit must support principal, accumulated interest, and applicable fees.
What happens if the planned refinancing is delayed?
The original repayment obligation remains unless the lender agrees otherwise. An extension may require additional fees, equity, collateral, or principal repayment. It should never be treated as automatic.
Does Financely provide the loan directly?
Financely provides structured debt advisory and arrangement services. Third-party capital providers make lending decisions and provide financing, subject to their approvals and closing requirements.
Structure Your Next Debt Facility
Financely helps companies, sponsors, and acquirers prepare financing proposals, approach suitable lenders, compare terms, and coordinate execution. Submit your funding requirement, available security, transaction deadline, and proposed exit for review.
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