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Bridge Financing Agreement for Canada

Bridge Financing Agreement Template for Canada

A Bridge Financing Agreement under Canadian law is a critical legal document that establishes the terms and conditions for short-term financing provided to bridge a company's immediate capital needs until a more permanent financing solution is secured. The agreement, governed by federal and provincial Canadian legislation, details loan amount, interest rates, security arrangements, repayment terms, and conditions precedent. It incorporates compliance with Canadian usury laws, securities regulations, and provincial security registration requirements, while addressing specific triggers for repayment or conversion, particularly in connection with future financing events.

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What is a Bridge Financing Agreement?

The Bridge Financing Agreement serves as a crucial instrument in Canadian corporate finance, providing companies with immediate access to capital while they work toward securing longer-term financing or achieving specific business milestones. This document type is particularly relevant in scenarios where companies face timing gaps between financing rounds, require funds for specific growth opportunities, or need working capital for ongoing operations. The agreement must comply with Canadian federal and provincial regulations, including securities laws, interest rate restrictions, and security registration requirements. Bridge Financing Agreements typically include detailed terms about repayment triggers, potential conversion rights, and security arrangements, making them essential tools for both lenders and borrowers in time-sensitive financing situations.

What sections should be included in a Bridge Financing Agreement?

1. Parties: Identification of the lender(s) and borrower(s), including their legal status and addresses

2. Background: Context of the bridge financing, including purpose and intended future financing or exit event

3. Definitions: Key terms used throughout the agreement, including financial terms, dates, and technical definitions

4. Loan Amount and Disbursement: Specification of the principal amount and disbursement mechanics

5. Interest and Fees: Interest rate, calculation method, payment frequency, and any additional fees

6. Repayment Terms: Maturity date, repayment schedule, prepayment rights, and mandatory repayment triggers

7. Security: Description of security interests granted to secure the loan

8. Conditions Precedent: Conditions that must be satisfied before the loan is advanced

9. Representations and Warranties: Borrower's statements about its legal and financial condition

10. Covenants: Ongoing obligations of the borrower during the term of the loan

11. Events of Default: Circumstances that trigger default and lender's remedies

12. General Provisions: Standard legal provisions including notices, amendments, governing law

What sections are optional to include in a Bridge Financing Agreement?

1. Conversion Rights: Terms for converting the bridge loan into equity, used when the bridge financing includes equity conversion features

2. Warrant Coverage: Terms of any warrant issuance to the lender, included when warrants are part of the financing package

3. Information Rights: Lender's rights to receive financial and other information, included for more sophisticated lenders

4. Board Observer Rights: Lender's rights to attend board meetings, included for institutional lenders

5. Future Financing Participation: Lender's rights to participate in future financing rounds, included when relevant to the bridge strategy

6. Subordination Provisions: Terms regarding ranking of the bridge loan, included when there are other creditors

7. Guarantees: Terms of any personal or corporate guarantees, included when additional credit support is required

8. Registration Rights: Rights related to registration of securities, included when conversion rights are present

What schedules should be included in a Bridge Financing Agreement?

1. Schedule A - Loan Terms: Detailed terms of the loan including amount, interest rate, and payment dates

2. Schedule B - Security Documents: List and copies of security documents

3. Schedule C - Draw Request Form: Form for requesting loan disbursements

4. Schedule D - Conversion Mechanics: Detailed procedures for conversion if applicable

5. Schedule E - Warrant Terms: Detailed terms of warrants if applicable

6. Schedule F - Disclosure Schedule: Exceptions to representations and warranties

7. Schedule G - Existing Indebtedness: List of borrower's existing debt obligations

8. Appendix 1 - Compliance Certificate: Form for periodic compliance certification

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Canada

Publisher

Ƶ

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions


















































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Relevant Industries

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Relevant Teams

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Corporate Development

Executive Leadership

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Relevant Roles

Chief Executive Officer

Chief Financial Officer

Finance Director

Corporate Treasurer

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Corporate Secretary

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Investment Banker

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