Bridge funding
vs working capital.

Operators typically approach a funder describing an amount and a timeline. What determines the right structure, though, is neither of those. It is the answer to a different question: what specific thing pays this back, and when does it happen?If there is a concrete answer with a date attached, the need is a bridge. If the answer is "the business, over time," the need is working capital. Almost every structural mismatch we unwind traces back to that question never having been asked.

What a bridge actually is

A bridge is capital deployed against a known future inflow, sized to the gap and timed to close when the inflow arrives. The defining characteristic is the identified exit. A general contractor mobilizing on a project whose first draw lands in seventy days has a bridge scenario: the draw is the exit, and it is on a schedule. A manufacturer who has shipped against a purchase order and is waiting on a net-90 invoice from a named customer has a bridge scenario. A business that has sold a property or is awaiting an insurance settlement has one.

Because the exit is identified, a bridge can be structured tightly. Terms run short — commonly 30 to 120 days. Sizing keys to the specific inflow rather than to general revenue. And repayment is often a single event rather than a long amortization, which means the business does not carry a debit through its operating cycle.

What working capital actually is

Working capital funds the ongoing operation rather than a dated event. It covers payroll, inventory, materials, marketing, and the general cost of running and growing the business. It is repaid out of overall cash generation over months rather than out of one identifiable inflow.

The structure reflects that. Terms are longer — commonly 6 to 24 months. Sizing keys to trailing deposits rather than to a single receivable. Repayment is amortized across daily or weekly debits, so the cost is spread and absorbed by the operating margin. There is no exit event, which means the business must generate the repayment from operations, which in turn means the sizing has to fit inside the margin with room to spare.

The cost comparison operators get backwards

Bridges usually price higher on a monthly basis. Shorter terms carry origination and diligence cost spread across fewer months, and the lender is underwriting a specific event rather than a diversified revenue stream. Operators see the higher monthly rate and reflexively choose the working capital position.

That is frequently the more expensive choice in absolute dollars. Consider a $150,000 need against a project draw seventy days out. A bridge priced at roughly 3 percent per month for two and a half months costs on the order of $11,000 and is gone when the draw lands. A twelve-month working capital position on the same $150,000 at a 1.30 factor costs $45,000 — and the business carries a debit for ten months after the need disappeared.

The reason is simple: you pay for time you hold the money. Matching the instrument's duration to the actual duration of the need is the single largest cost lever most operators have, and it is routinely ignored in favor of comparing headline rates.

When the working capital position is right anyway

The bridge is more efficient only when the exit is reliable. If the repayment event is genuinely uncertain in timing — a settlement with no firm date, a draw from a customer with a history of slipping schedules, a closing subject to conditions you do not control — the longer instrument buys protection that is worth its extra cost.

A bridge that matures before the event occurs converts a manageable situation into an acute one. If a seventy-day draw becomes a hundred-and-forty-day draw and the bridge has no extension provision, the business is now in default on a position it fully expected to retire. Where that risk is real, taking the longer, more expensive instrument is not inefficiency, it is buying insurance against a slip.

Working capital is also correct whenever the need is recurring. If the receivables gap exists every month because that is how your industry pays, no bridge fixes it — bridging a permanent condition just means bridging again next quarter, and again after that, which is the mechanism that produces stacked positions.

A practical test

Before requesting capital, write two sentences. First: this money will be repaid by [specific source] on approximately [date]. Second: if that source is delayed by sixty days, the business will [specific plan].

If the first sentence can be written concretely and the second has a real answer, ask for a bridge and size it to the gap. If the first sentence can only be written vaguely, ask for working capital and size it so the debit fits comfortably inside your slowest month. If the first sentence describes a situation that recurs every quarter, you need a revolving or receivables-based instrument rather than either of these, and solving it with one-time positions will compound rather than resolve.

The instrument should match the shape of the problem. Most expensive capital decisions are not about picking a bad lender — they are about picking a correctly priced instrument for the wrong duration.