Bridge Financing vs Venture Debt vs a Bank Overdraft: Which Fits a Working-Capital Gap?

A growing company with a temporary cash gap has three realistic ways to cover it without selling equity: a bank overdraft, venture debt, or a bridge facility. They are not interchangeable. Each is cheapest and safest in a different situation, and choosing the wrong one is expensive. This is how to tell them apart.

Key takeaways

• A bank overdraft has the lowest headline rate, but it needs collateral, a banking track record, and time. It fits a recurring, secured, ongoing need, not a sudden one.
• Venture debt extends the runway of a company that has already raised institutional equity. It is quick relative to a bank, but it usually carries warrants, so it is not fully non-dilutive, and it is really built for VC-backed growth-stage companies.
• A bridge facility is built for speed and a specific, bounded, repayable gap. It is non-dilutive and does not wait on collateral, which is why it costs more than a bank line. It fits a revenue-strong company that needs money in days, not weeks.
• The cheapest rate is often the wrong answer. The right instrument is the one built for the shape of your particular need.

What these three instruments actually are

Before comparing them, it helps to be precise about what each one is, because they are often lumped together as debt and treated as the same thing. They are not.

A bank overdraft, or cash credit line, is a revolving facility from a bank. You draw against a sanctioned limit when you need cash and repay as it comes in, paying interest only on what you use. It is secured against collateral and priced off the RBI repo rate, which sat at 5.25 percent in August 2026.

Venture debt is a term loan for a company that has raised institutional venture capital. In India it has typically been priced in a range of roughly 10 to 18 percent, usually with warrants attached, a right for the lender to buy a small slice of equity later. It is designed to extend runway between equity rounds.

A bridge facility is short-term structured credit for a specific, time-sensitive need. It is arranged fast, it is non-dilutive, and it is sized and priced to a particular repayable gap rather than to a revolving limit or a runway.

The bank overdraft: cheapest rate, most conditions

Start with the overdraft, because it is the default most founders reach for, and often correctly.

Its great advantage is price. A bank line is repo-linked, so its headline cost usually sits in the low double digits, below what the other two instruments charge. If your need is a recurring, predictable working-capital cycle, and you can pledge collateral, nothing beats a sanctioned overdraft on cost.

The catch is everything around the rate. A bank wants security, usually a charge on assets or a fixed deposit. It wants a multi-year track record and a banking relationship. And it works on a bank's timeline, which means weeks to arrange and an annual renewal that can be slow or reduced when you least want it. The overdraft is the cheapest money you can borrow, and the hardest to get in a hurry.

Venture debt: runway for the VC-backed

Venture debt solves a narrower problem. A company that has raised an equity round wants to make that money last longer without raising the next round early and diluting further. Venture debt sits on top of the equity to buy time.

It is faster than a bank because the lender underwrites the quality of your investors and your growth rather than demanding hard collateral and years of accounts. Firms such as Trifecta Capital, Alteria Capital, Stride Ventures and InnoVen Capital operate in this space in India.

But it comes with two conditions that matter. First, you generally need to have raised an institutional venture round to qualify at all. A profitable company that never took VC often does not fit the box. Second, it usually carries warrants. That equity kicker means venture debt is cheaper than equity but not free of dilution, whatever the brochure says. For a VC-backed company extending runway, it is often the right tool. For anyone else, it frequently is not available or not appropriate.

The bridge facility: speed for a bounded gap

A bridge facility exists for the situation the other two handle badly. A specific, bounded, repayable need that has to be met in days, by a company that either lacks the collateral or the time for a bank, or does not want to hand over warrants.

The examples are concrete. A large purchase order that needs funding before the customer pays. An inventory build ahead of a strong season. A receivable that is certain but not yet collected. A gap before a planned equity round that you do not want to close at a weak valuation. In each case the need has a clear end date and a clear source of repayment.

The trade-off is honest. A bridge is priced above a bank overdraft, because you are paying for speed, for the absence of a collateral demand, and for capital shaped to your specific situation rather than a standard product. What you get for that is money in 48 to 72 hours, no equity given up, and a facility that repays and disappears once the gap closes. It is the wrong tool for a permanent capital need, and the right one for a temporary, self-liquidating one.

How to choose: match the instrument to the need

The decision is simpler than the options make it look, because the three instruments answer three different questions.

Do you have collateral and time, and is the need a recurring, ongoing one? Use a bank overdraft. It is the cheapest, and its slowness does not hurt you when the need is not urgent.

Have you raised institutional venture capital, and do you want to extend runway between rounds? Venture debt is built for exactly that, and the warrants are the price of not raising equity early.

Do you need money fast, for a specific and repayable gap, without diluting or waiting on a bank? That is what a bridge facility is for. It costs more than the overdraft, and it is worth it precisely when speed and certainty are the scarce things.

Figure 1: Match the instrument to the shape of the need

Price is the last question, not the first.

Notice that price is the last question, not the first. The cheapest instrument you cannot access in time, or cannot qualify for, is not cheap. It is unavailable.

The three instruments, side by side

	Bank overdraft	Venture debt	Bridge facility
Best for	Recurring, secured working-capital cycles	Extending runway for a VC-backed company	A specific, bounded, urgent, repayable gap
Typical speed	Weeks, plus annual renewal	Several weeks	48 to 72 hours
Headline cost	Lowest, repo-linked, low double digits	Roughly 10 to 18%, plus warrants	Above a bank line, priced for speed
Dilution	None	Warrants, a small equity kicker	None
Collateral	Usually required	Often, plus a prior VC round	Not required in this model
Eligibility	Track record, security, banking relationship	An institutional VC round and growth	Revenue you can underwrite and a clear repayment

Figures are indicative and move with the market. Rates in particular track the RBI repo rate and each lender's own pricing, and should be checked at the time of borrowing.

Figure 2: Directional positioning of the trade-off

Directional positioning of the trade-off, not a rate table.

Figure 3: A directional scorecard

A directional scorecard. Each instrument is strong somewhere.

Where each one is the wrong choice

The fastest way to choose well is to know when each instrument is a mistake, including our own.

A bank overdraft is the wrong choice when you need the money in days, when you cannot or will not pledge collateral, or when the need is a one-off rather than a revolving line. Waiting three weeks for the cheapest rate can cost far more than the rate ever would.

Venture debt is the wrong choice when you have not raised an institutional equity round, when you do not want to give up any equity at all, or when you are a profitable business that simply does not fit the VC-backed mould it was designed for.

A bridge facility is the wrong choice when you have collateral and time, because then a bank overdraft is cheaper and you should use it. It is the wrong choice for a pre-profit company extending runway, because venture debt fits that better. And it is the wrong choice for a permanent capital need, because that is an equity question, not a debt one. A bridge earns its higher cost only when speed, flexibility and non-dilution are the things you actually need.

What we can say from our own desk

Three things we see directly.

Speed is the point of a bridge. Where a facility is arranged, it moves in 48 to 72 hours, with funds typically reaching the company's primary treasury by Day 4. If speed is not what you need, one of the other two instruments is probably cheaper.

The most common reason a company is declined is that its revenue is too small or too unpredictable to service repayment in a flat case. Bridge financing underwrites revenue quality and a clear repayment path, not projections and not the next round.

The companies this suits sit across manufacturing and industrials, D2C and consumer, SaaS and technology, and services. What they share is not a sector. It is revenue you can underwrite and a need with a beginning and an end.

One number we do not publish, because we will not estimate it. Out of the last 100 enquiries we received, the count that resulted in a funded facility depends on the revenue quality behind them, and we would rather leave the figure open than print one we cannot stand behind.

Frequently asked questions

Is venture debt the same as a bank loan?

No. A bank loan or overdraft is secured against collateral and priced off the repo rate, and it does not depend on you having raised equity. Venture debt is a term loan for companies that have raised institutional venture capital, is priced higher, and usually carries warrants. The two serve different companies and different needs.

Why is a bridge facility more expensive than a bank overdraft?

Because you are paying for speed, for the absence of a collateral demand, and for capital shaped to a specific situation rather than a standard product. A bank overdraft is cheaper on rate but slower to arrange and secured against assets. A bridge trades a higher rate for money in days and no equity given up.

Does venture debt dilute ownership?

Partly. Venture debt is far less dilutive than raising equity, but it usually carries warrants, which give the lender the right to buy a small slice of equity later. So it is cheaper than equity in dilution terms, but it is not fully non-dilutive. A true non-dilutive instrument, like a bridge facility, carries no warrants at all.

Which is cheapest for a working-capital gap?

On headline rate, a bank overdraft, because it is repo-linked and secured. But the cheapest rate is only cheap if you can access it in time and qualify for it. If the gap is urgent, or you lack collateral, a facility you can actually draw in days may cost less in practice than a cheaper one you get too late.

When should a company not use a bridge facility?

When it has collateral and time, in which case a bank overdraft is cheaper. When it is a pre-profit VC-backed company extending runway, where venture debt fits better. And when the need is permanent rather than a bounded, repayable gap, because a permanent need is an equity question. A bridge is for temporary, self-liquidating needs.

Ready to check what fits?

If you are weighing these three against a specific gap, the fastest way to know whether a bridge even fits is a short pre-check, a fit assessment against your revenue and the shape of the need. If a bank overdraft or venture debt is the better answer, we will say so, and point you to it. Start with the shape of your need, not the headline rate.

About Debtsify

Debtsify is a private structured-credit and bridge-financing partner for high-growth Indian companies. It arranges ₹5 Cr to ₹100 Cr in 48 to 72 hours, 100% non-dilutive, with no equity, warrants, board seats, or collateral. It is not a bank, an NBFC-marketplace, or a loan aggregator. It is a capital partner.

This article is for information only. It is not investment, legal or financial advice, and it is not an offer of any facility. Figures on Zepto are drawn from press reporting of the company's filings and from named sources, are attributed with dates in the source notes, and should be verified against primary filings before any decision. Valuations, rates and outcomes change.