Legal Definitions - interim financing

Interim financing refers to temporary funding provided to cover immediate financial needs until a more permanent or larger financing solution can be secured. It acts as a short-term bridge loan, designed to fill a funding gap for a specific period.

Here are some examples to illustrate:

• Imagine a real estate developer who has identified a prime piece of land for a new apartment complex. The opportunity to purchase the land is time-sensitive, but the developer's primary, long-term construction loan is still several weeks away from final approval. To avoid losing the land, the developer secures interim financing from a bank. This temporary loan allows them to purchase the land immediately, bridging the gap until the larger, permanent construction financing is ready to be disbursed.

• Consider a growing manufacturing company that is in the final stages of negotiating a major acquisition of a smaller competitor. The full financing package for the acquisition, which includes a mix of debt and equity, is complex and will take another two months to finalize. However, the acquiring company needs immediate funds to cover the target company's payroll and essential operational expenses for the upcoming month to ensure a smooth transition. They obtain interim financing to cover these immediate costs, allowing the acquisition process to move forward without disruption while the long-term funding is being completed.

• A technology startup is in the process of raising a significant Series C investment round, which is expected to close in about four months. Due to unexpected delays in product development and market testing, their existing cash reserves are running low, and they need funds to cover critical operating expenses like employee salaries and server costs for the next three months. To avoid a cash crunch, the startup secures a "bridge loan" (a form of interim financing) from their current investors. This temporary funding ensures the company can continue its operations and development efforts until the larger Series C round is successfully closed.