Bridging loans for business

Most business property problems are timing problems. The new premises settle before the old ones sell. The bank approves the purchase but can’t produce documents by the settlement date. A private loan matures three weeks before the refinance is ready. In each case the money exists; it just isn’t there yet.

A bridging loan closes that gap. This page sets out the four gaps bridging is used for, how each is structured, what it costs and how to stop a bridge turning into a longer problem.

What is a business bridging loan?

It’s a short-term loan, secured on real property, that funds something now and is repaid from a specific, expected payment later: a sale, a refinance or a settlement. The defining feature is the exit is known before the loan starts.

Bridging is a purpose, not a product type. The same bridge might be set up as a private first mortgage, a second mortgage behind an existing bank loan, or a caveat loan, depending on what’s on the title and how long the gap is. Our caveat loan vs bridging loan comparison explains why the two terms are so often confused.

Key terms

• Closed bridging: the exit is contracted, such as a sale with a fixed settlement date.
• Open bridging: the exit is planned but not yet secured, such as a property about to be listed.
• Peak debt: the most you’ll owe across all properties at the busiest point of the bridge.
• End debt: what’s left after the exit, which must be refinanced or repaid.

Which four gaps do business bridging loans cover?

Gap	What’s happening	Typical structure	Usual exit	Read more
Buy before you sell	The new property settles before the old one sells	First or second mortgage across one or both properties	Sale of the old property	Bridge until a property sells
Bank approval delay	The bank is slow or its documents won’t be ready by settlement	First mortgage over the purchase, sometimes with other property	Bank refinance	Settle a purchase on time
Refinance gap	An existing loan matures or is in trouble before a new lender is ready	First mortgage paying out the old loan	Bank or other refinance	Pay out an expiring private loan
Settlement shortfall	The purchase needs more than the bank will lend, or duty and costs fall due first	Second mortgage or caveat over other property	Refinance, sale or business cash	Off-the-plan settlement shortfall

Auction purchases and duty bills are two of the sharpest versions of these gaps, and both have their own pages: buying at auction with property equity and funding stamp duty on a property purchase.

Why do auctions and duty make bridging so common?

Because both remove your room to wait.

Auctions. In New South Wales, the government’s guidance is clear that no cooling-off period applies when you buy at auction, and a deposit is payable at exchange. There’s no finance clause to lean on if the bank is slow, so the buyer has to be ready to settle on the contract date regardless. A bridge secured on property you already own can cover the deposit, the settlement, or both, until the bank catches up.

Duty. Revenue NSW sets transfer duty as due by the earlier of settlement or three months after the contract is signed, and interest accrues on overdue amounts. For a long settlement, that means duty can fall due before the property is even yours. Other states set their own timing, so check with the relevant revenue office.

How do closed and open bridging loans differ?

	Closed bridging	Open bridging
Exit status	Contracted: sale exchanged or refinance approved	Planned: listing, campaign or application under way
What the lender checks	The contract, settlement date, any open conditions	Saleability, likely campaign length, the price you’re expecting
Term	Settlement date plus a buffer	Longer, with a meaningful buffer
Equity needed	Lower, because the exit is known	Higher, because the exit could change
Risk	Mainly a delayed settlement	Price and time risk on the sale

Closed bridges are simpler and generally sit more comfortably within shorter terms. Open bridges are possible, but they need stronger equity and an honest view of the sale. Our exit strategy red flags guide lists the warning signs lenders look for.

How much can you borrow on a bridging loan?

Bridging is assessed on peak debt: everything owing across all the properties offered as security at the busiest point of the bridge, including any capitalised interest. The question is whether that peak debt sits comfortably against the properties, and whether the end debt, after the sale or refinance, is something the exit can absorb.

That’s why many business bridges use more than one property. Offering the property being sold and the one being bought together, or adding a third property, can turn a tight deal into a comfortable one. See multiple properties as security, and run your own figures in the equity calculator.

How are repayments handled during a bridge?

Most bridges capitalise interest, adding it to the loan and repaying it from the sale or refinance. That suits a bridge perfectly, because the exit is a lump sum and the business isn’t asked to carry two sets of repayments while it waits. Interest can also be prepaid at the start or paid monthly if you’d prefer the balance not to grow. See prepaid or capitalised interest.

What does a bridging loan cost?

Bridging is priced on the security, the LVR, the term and the exit, and the aim is always the sharpest price your situation allows. A closed bridge with low peak debt and a first mortgage tends to cost less than an open bridge on a second mortgage or caveat. Costs include interest, an assessment fee that varies per loan and appears on the Letter of Offer, and legal and registration costs. No formal valuation required, so there’s no report fee and no wait for one.

The biggest cost driver you control is time. Every extra month adds interest, so a realistic term with a buffer is cheaper than a short term that needs extending. Read the total cost of a short-term loan before you choose.

How fast can a business bridging loan settle?

Bridging is usually needed against a fixed date, so speed is the point. Funding is possible within 24–48 hours for up to $5m once documents are in, and smaller amounts of $20k to $250k are possible the same day. There’s no formal valuation required, so no report sits on the critical path.

What usually decides the timing is paperwork from other people: a payout figure from the existing lender, the signed sale contract, the bank’s approval letter, or a trust deed. Ask for those on day one. If the purchase settles on PEXA, the bridge can often settle in the same electronic settlement, which keeps the dates aligned.

What documents does a bridging lender need?

Item	Why it matters for a bridge
Identification for each owner, director and guarantor	Everyone who signs is verified first
The purchase contract, if you’re buying	Confirms price, deposit, settlement date and conditions
The sale contract or listing agreement, if you’re selling	The exit: contracted (closed) or planned (open)
Bank approval or refinance letter, if that’s the exit	Shows the refinance is real and what conditions remain
Statements for every existing mortgage	Sets the peak debt and who ranks where
Company, trust and ABN details	Confirms who can borrow and give security

What are the risks in a bridge, and how do you manage them?

• The sale takes longer. Campaigns stretch and settlements slip. Set the term with a buffer, and don’t assume the first offer arrives in week one.
• The sale price comes in lower. Test the end debt at a cautious price, not your best-case figure.
• The bank changes its mind. If a refinance is the exit, check what conditions remain on the approval and how long it lasts.
• Capitalised interest grows the peak debt. Include it when you check the numbers.
• The date passes. If an exit is slipping, ask about an extension before maturity, not after.

Who suits a bridging loan, and who doesn’t?

Suits you if:

• you own property with equity and the gap is measured in weeks or months;
• the exit is contracted, approved or very close to it;
• the deadline is fixed: an auction, a settlement, a maturity date or a duty bill.

Doesn’t suit you if:

• the “exit” is a sale at a price the market hasn’t confirmed;
• the end debt would be more than a bank will realistically refinance;
• the purpose is personal, such as your own home.

How does a business bridging loan work, step by step?

1. Enquiry in 60 seconds: properties, debts, the gap and the exit. No credit check.
2. Specialist call to confirm the dates and the strength of the exit.
3. Structure: which properties secure the loan, in what order, and for how long.
4. Letter of Offer with the term, interest arrangement and fees.
5. Documents prepared, reviewed by your solicitor and signed.
6. Settlement, often on the same electronic settlement as the purchase. On PEXA, funds are exchanged and eligible documents lodged with the land registry together.
7. Exit: the sale or refinance settles, the bridge is repaid and the security discharged. Where a bridge covers several properties, a partial discharge can release a property as it sells while the rest of the debt stays secured.

Illustrative example: a Melbourne food manufacturer has outgrown its Dandenong factory and buys a larger one in Keysborough for $3.2m. The bank will lend $2m against the new building, but the rest of the price, plus duty and costs, was meant to come from selling the old factory, which is worth about $2m, is debt-free and hasn’t gone to market yet. Illustrative: a $1.4m bridging loan secured by a first mortgage over the old factory and a second mortgage behind the bank over the new one, so peak debt across both properties is $3.4m against $5.2m of property, an LVR of about 65%. Interest is capitalised. Five months later the old factory sells, the bridge is repaid at that settlement, and the bank’s loan on the new factory simply carries on.

Got a gap to close? See if you qualify

Tell us the dates, the properties and how the bridge will be repaid. A specialist will tell you whether it’s a closed or open bridge, which structure fits and how long the term should be. An enquiry leaves no mark on your credit file, and it’s assessed by our lending partner fundU itself rather than being forwarded to other lenders.

Precise figures on the properties and what’s owing make the answer reliable from the start.

Start a bridging loan enquiry in about 60 seconds, or read short-term business loans if your exit isn’t a property, then check your options.

fundU also publishes pages on business bridging finance and commercial property bridging loans.