Bridge Loans in the Final Six Months Before IPO

Bridge loans — short-term debt financing provided by existing investors or banks to fund operations in the final months before IPO — are a common pre-IPO financing tool. Typical terms: 6-12 month tenor, 8-12% annual interest rate, secured against company assets or personally guaranteed by founders, with mandatory repayment from IPO proceeds. The bridge-to-IPO loan structure creates a tension: the lenders (usually existing investors) have an incentive for the IPO to complete quickly to get repaid, while the company and its sponsors have a duty to complete the IPO process thoroughly regardless of timeline. This tension must be managed through clear communication: lenders should understand that the sponsor team will not accelerate the regulatory process to meet a loan maturity date. A growing alternative to traditional bridge loans is the ‘pre-IPO convertible facility’ — a convertible note that automatically converts into IPO shares at a discount to the IPO price if the listing completes within a specified period, or converts into equity at a pre-agreed valuation if the IPO is delayed beyond 12-18 months. This structure aligns the lender’s interest with a successful (not just fast) IPO.