The Truth About Bridge Loans Need a loan? Ask your investors.

"We'll likely need a bridge." That's one of the most dreaded phrases we can hear from the CEOs of companies we invest in.

Bridge financing, put simply, is an IOU backed by the promise of raising more money in the future. When it happens, you'll inevitably witness some VC gallows humor, as one obnoxious person in the room asks, "Is this a bridge or a plank?" It never fails.

The truth is that bridge notes are used all the time. Perhaps the next round of money from new investors didn't arrive as quickly as projected. Maybe sales are down. The list goes on and on as to possible reasons behind the request.