Bridge financing
Bridge financing ( English bridge financing or bridge loan ) is the generic term for the short-term pre- or interim financing of certain transactions ( real estate purchase , company purchase ) carried out by credit institutions up to the final follow- up financing .
species
There are mainly three types of bridge financing, namely in real estate financing , corporate financing and IPOs .
Real estate financing
In Germany, Austria and Switzerland, the terms pre-financing and interim financing mainly come from the real estate financing sector. Here they are used in connection with short-term loans that are intended to bridge the period between the borrower's payment obligation and the final real estate financing. If the final financing is ready for disbursement, it serves to replace the pre-financing or interim financing, which is why it is also referred to as credit redemption. Typical construction financing has only 4 to 5 reasons for disbursement with flat disbursement rates depending on the construction progress (25% of the loan payable upon completion of the basement ceiling, another 25% with shell construction, another 25% with finished interior installation, the rest upon handover). The payments from this are therefore not always available in the construction phase, as is necessary to settle the construction bills that arise at short intervals. In order to meet these conditions, bridging finance is sought that is flexibly adapted to the payment requirements without disbursement quotas.
Since May 1, 1993, interim construction financing has been subject to the exception for real estate loans under Section 492 (1a) 2 BGB. The provision of medium-term or short-term funds, which are to be replaced by means of the final financing secured by real estate, is regarded as bridging financing.
A real estate loan within the meaning of Section 492 Paragraph 1 a 2 BGB is always given if, in addition to the general requirements for consumer loan contracts, two further criteria are met. This is, on the one hand, the dependency of the granting of a loan on a mortgage (or compliance with the requirements of Section 7 (3) to (5) BSpkG) and, on the other hand, the granting of the loan or a corresponding bridging loan under conditions that are to be regarded as customary in the market for these loans.
Corporate finance
In the international lending business, bridge financing is one of the established, strategic instruments of corporate financing .
The acquisition of a company by investors often requires a high capital investment and is usually carried out under great time pressure. If the purchase price, which is due immediately, cannot be covered, or not fully covered, from existing sources of finance and the final forms of financing are not yet known, bridge financing in the form of pre-financing is required. Company acquisitions often come about at such short notice that solid financial planning cannot be geared towards them, so that more “spontaneous” financing solutions such as bridge financing have to be chosen. During the term of the bridge financing, the investor has sufficient time to decide on the final financing sources and to ensure that the bridge financing is replaced. Bridge financing in this form is then concretely pre-financing because the final sources of financing were not yet known.
initial public offering
When IPO bridge funding is often necessary because the equity after the IPO or after a capital increase is available, although previously the financing needs for investment has occurred. Bridge financing therefore makes the company independent of the IPO.
Follow-up financing
Typical for both types of bridge financing is initially the lack of or inadequate disbursement of the follow-up or final financing. If this is contractually secured, then there is bridging financing, but if it is not yet contractually secured, it is pre-financing. The higher risk for the creditor is therefore with the pre-financing, because the repayment of his loan is then not guaranteed by the follow-up financing . In the case of bridging financing, there is the possibility that the institution providing the bridging financing can assign the payment claims from the follow-up financing by way of assignment as collateral .
No bridge financing
Loans that are for bridging liquidity shortfalls, do not represent a bridge financing. This includes bank overdrafts , overdraft facilities or mass loans in bankruptcy.
Individual evidence
- ↑ Peter Bülow / Markus Artz, Consumer Credit Law , § 491 Rn. 191
- ↑ Munich Commentary on the BGB / Ulmer, § 491 Rn. 6ff; Jork / Engel, BKR 2005, 7; Habersack, WM 2000, 982
- ↑ Helmut Bruchner in Banking Law Handbook, p. 1730; Siegfried Kümpel, Banking and Capital Markets , 838 Rn. 5,140, 5,141 / 2; Hans-Peter Schwintowski in Banking Law, p. 610 § 15 Rn. 83; Peter Bülow, Consumer Credit Law , § 491 Rn.
- ↑ Wolfgang Servatius, Influence of creditors through covenants , 2008, p. 30 f.