Bridge loans for search funds?

March 11, 2022

by a searcher from The University of Chicago - Booth School of Business in Chicago, IL, USA

I know that over the last several years it has become more and more common for big private equity firms to use bridge loans in order to give themselves more time to decide the optimal capital and capital table structure and, candidly, to juice their IRRs by shorting there hold periods.

I like the concept and have a deal under LOI where it will close to fast for the optimal traditional lending structure. Has anyone had any experience trying to use bridge loans or some similar structure in the micro-cap market?

If anyone is or knows a lender who does bridge loans for <$5M against a fully funded and committed capital fund, I'd be interested to get in touch with them.

Reply by a lender
from McGill University in Greenwich, CT, USA

Hi - I'd love to have a conversation with you. My firm, Libertas Funding, is a short-term, revenue/cash flow-based lender that finances micro-cap acquisitions. We underwrite the target company's financials, enabling the buyer to leverage the target's cash flows upfront in the acquisition. Buyers frequently use our capital to secure the deal and then take us out early at our prepayment discount rates upon securing optimal long-term capital - effectively the bridge piece you speak of. We can fund up to $5M extremely quickly - typically within 1-3 business days upon document receipt. If you're interested in learning more, please email me at redacted Thank you!

Reply by a searcher
from The University of Chicago in Chicago, IL, USA

All interesting thoughts, thanks for chiming in. To give a bit more context, close is scheduled in the next few weeks and total exclusivity was to short to finance any traditional way. The business could easily support a few million in debt but we will likely have to fund all equity and recap after close. I was hoping there was some solution to not unnecessarily drag down IRRs since I could get debt comfortably with a longer exclusivity period. I'll check here periodically and reach out to those of you appropriate as time allows, for now we are running full focus on close as the deal justifies itself even without the debt.

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