• Skip to primary navigation
  • Skip to main content
  • Skip to footer

KPPB LAW

Corporate Law Firm

  • About Us
  • Attorneys
  • Practices
    • Asset Based Lending
    • Bankruptcy Law
      • Chapter 7
      • Chapter 11
      • Purchasing Assets
      • Creditor Committee Representation
    • Business Debt Collection
    • Commercial Loan Workouts
    • Commercial Real Estate Finance
    • Commercial Real Estate Transactions
    • Construction Law
      • Construction Project Planning
      • Construction Claims and Disputes
      • Construction Contracts
    • Contract Law
    • Corporate Governance
      • Formation of Entities
    • Cross — Border Transactions
    • Hotel Law
    • Immigration Law
    • Intellectual Property
    • Labor & Employment Law
      • Employment Litigation
    • Landlord/Tenant Law
    • Litigation & Dispute Resolution
    • Mergers & Acquisitions
    • Securities
    • Tax Law
    • Technology Law
    • Trusts & Estates
  • Firm News
  • Legal Blog
  • 1-678-443-2244
  • Contact Us

Bridge Loans

› Commercial Real Estate Finance › Bridge Loans

In the high stakes arena of mergers and acquisitions, access to bridge loans from a trusted lender may mean the difference between closing the deal and losing the opportunity to acquire a company, subsidiary or division. The likelihood that a potential purchaser will be able to follow through with the transaction promptly if the bid is accepted is a key area of concern for target companies.

Bridge loan terms can be extremely complex, and it is advantageous to have an attorney experienced in the bridge loan process working to protect your interests.

Bridge Loan Basics

Bridge loans are intended to fill a gap until long-term financing can be obtained. However, there is significant risk associated with the short-term funding. As such, a bridge loan that is not paid off when it reaches maturity will automatically convert to long-term financing, typically at terms that are not favorable to the borrower.

Bridge loans themselves are relatively low-profit products for lenders, and tend to carry high risk. However, investment banks with an interest in other aspects of the transaction, such as the opportunity to arrange long-term financing, will often take that risk. In some cases, bridge loan commitments come from investment banks playing a role in the acquisition, as a means of ensuring that the transaction moves forward.

Bridge Loan Costs

There are a number of fees associated with bridge loans, some of which are payable even if the loan is never funded. These include:

  • A commitment fee, payable regardless of whether or not the loan is ever originated
  • A deal-away fee, which is payable in the event that the borrower uses alternate financing
  • A funding fee, which is payable if and when the loan is funded

In addition, the borrower may be responsible for an administrative agent’s fee if the loan is syndicated, a periodic fee during the life of the loan, and a refinancing fee if the loan is refinanced ahead of schedule.

Negotiate the Best Terms for Your Bridge Loan

Since prospective buyers often pursue bridge loans as a fallback, some may feel that the terms of the bridge loan are not critical. Often, the prospective borrower and the prospective lender both enter into the agreement in hopes that the loan will never close. However, the terms of a bridge loan commitment are very important.

Bridge Loan Terms and Bid Acceptance

While the acquiring company or investor may be hoping and expecting that the bridge loan will not be necessary, the commitment provides certainty to the target company. As such, that company will have an interest in the terms of the bridge loan commitment and how well it will serve its purpose if it is required.

Bridge Loan Funding

In some cases, whether by design or because alternative options fall through, the bridge loan will be funded in order to allow the acquisition to move forward. In that circumstance, of course, the terms of the bridge loan become very relevant to the borrower and perhaps to the successful operation of the acquired company.

Bridge Loan Securities Demands

A securities demand provision allows the lender to demand that the borrower issue long-term debt securities in order to refinance the bridge loan. The specifics of this provision are often a key issue for negotiation, as the lender’s control over the offering of these securities to the market carries risk for the borrower. Another important point to be negotiated is the remedy or remedies available to the lender if the securities demand does not raise enough money to refinance the loan.

An Experienced Attorney Can Help Secure the Best Bridge Loans for You

While you may be unaccustomed to consulting an attorney before taking out a business loan, the complexities associated with a bridge loan and the impact of the terms of the bridge loan commitment on the likelihood that your acquisition bid will be accepted mean that you cannot afford to choose a bridge loan provider and enter into an agreement without a thorough analysis.

When you work with an attorney in our firm, we will guide and assist you every step of the way, including the following services:

  • Help you identify the best bridge loan opportunity for your situation
  • Negotiate on your behalf to obtain the best terms possible
  • Thoroughly review and explain your loan agreement
  • Advise you regarding your options for alternative financing

Do not leave this all-important aspect of your planned acquisition to chance. Contact KPPB LAW today for more information.


Commercial Real Estate Finance Attorneys at KPPB LAW

Nicky Cooke KPPB Law Attorney portrait
Annique (Nicky) Cooke

Senior Associate
KPPB Law Attorney Samir C. Patel
Samir C. Patel

Partner
Nikhil Prabu KPPB Law
Nikhil R. Prabhu

Partner
Nichole Roche KPPB LAW
Nichole Roche

Partner
Kirtan Patel KPPB LAW
Kirtan Patel

Partner
Asad Ansari Headshot
Asad Ansari

Associate

info@kppblaw.com


Footer

Atlanta, Georgia

One Lakeside Commons
Suite 800
990 Hammond Drive
Atlanta, GA 30328
678-443-2244
[Corporate Office]

Gainesville, Virginia

7330 Heritage Village Plaza
Suite 201
Gainesville, VA 20155
703-594-4040

Chicago, IL


312-857-5263

New York, New York

12 East 49th Street
New York, NY 10017
203-875-0808

© 2023 KPPB LAW · All Rights Reserved · Legal Disclaimer

Website powered by 321 Web Marketing