Quick answer
Bridging finance is a short-term, property-secured loan that lets a business buy new premises, settle a purchase or meet a commitment before an existing property or asset sells. The lender funds the overlap, usually for up to about twelve months, often with interest added to the balance. It's repaid from the sale proceeds, with any remaining debt refinanced into a standard loan.
Key points
- Covers the overlap when a purchase settles before a sale, typically for months, not years
- Lenders size it on peak debt (everything owed during the overlap) and end debt (what's left after the sale)
- Closed bridges, with a sale already exchanged, are easier to approve than open ones
- Interest is often capitalised, so the debt grows each month the sale is delayed
- Owning two properties on a state land tax date can add a full year of land tax
- Typical amounts
- $20k to $5m (property-secured)
- Typical term
- 1 to 12 months
- Repaid from
- Sale proceeds or refinance
- Security
- The existing property, the new one, or both
Timing is the whole problem. The warehouse you want is available now, the owner wants a 60-day settlement, and the factory you’re leaving won’t sell in 60 days. Or a property you’ve agreed to sell settles in March while the purchase you need settles in January. Banks specialise in steady, long-term lending, and they can bridge for strong clients, but overlaps like these are exactly what specialist bridging finance exists for.
Peak debt and end debt: the two numbers that decide everything
Every bridging lender works from two figures, and you should too.
Peak debt is the high-water mark of borrowing while both properties are in your hands. It’s your existing loan, plus the new purchase, plus stamp duty and costs, plus any interest that will be capitalised during the bridge.
End debt is what’s left once the old property sells and the proceeds are applied. That’s the loan you’ll carry afterwards, and it must suit an ordinary lender or your business cash flow.
A worked example
These figures are illustrative only.
| Item | Amount |
|---|---|
| Current premises: estimated sale price | $1.4m |
| Current premises: existing loan | $400k |
| New premises: purchase price | $2.1m |
| Stamp duty, legal and other purchase costs (estimate) | $120k |
| Interest capitalised over a six-month bridge (lender’s quote) | Say $90k |
| Peak debt ($400k + $2.1m + $120k + $90k) | $2.71m |
| Sale proceeds after agent and legal costs (estimate) | $1.36m |
| End debt ($2.71m − $1.36m) | $1.35m |
The lender then asks two questions. Does $2.71m sit within its loan-to-value limit across both properties (combined value $3.5m)? And can the business service $1.35m after the sale, or refinance it with a bank? Our bridging loan calculator runs this arithmetic with your own numbers.
Notice how the capitalised interest line works. If the sale takes nine months instead of six, that line grows and end debt rises with it. Use a conservative sale estimate and a realistic time on market, not the agent’s most optimistic figures.
Open bridge or closed bridge?
A closed bridge has the sale already exchanged with a settlement date. The exit is known, so lenders are comfortable and the paperwork is straightforward.
An open bridge has no sale yet. The lender is relying on your estimate of price and timing, so expect more caution: lower maximum loan-to-value, a firmer look at how quickly the property could be sold, and sometimes a requirement that it’s listed by a certain date. Open bridges are entirely possible for businesses with solid equity; they just need a better-argued plan.
If you’re bridging a business purchase or settlement that might slip, our page on a settlement about to fall over covers the urgent end of the spectrum.
Weighing up whether to buy before you sell? Give us the two property figures and a specialist can sketch the peak debt with you, with no credit enquiry made.
The land tax trap most bridges ignore
Each state fixes one snapshot moment a year for land tax, and holding both properties when the snapshot is taken can be costly.
- New South Wales: Revenue NSW looks at the taxable land you hold as the clock strikes midnight on 31 December, then charges for the entire year that follows. It isn’t reduced if you sell the property early in that year.
- Victoria: land tax is paid by whoever owns the land at midnight on 31 December of the previous year.
- Queensland: the Queensland Revenue Office assesses freehold land held at midnight on 30 June, for the following financial year.
Business premises don’t get a principal place of residence exemption, so a bridge that straddles one of those dates can leave you paying a year’s land tax on a property you sold weeks later. Thresholds, aggregation rules and who’s liable vary, so talk to your accountant, but a settlement date chosen a few days either side of the cut-off can be worth real money.
What do bridging lenders check?
| Lender focus | What they want to see |
|---|---|
| Peak debt against value | Total owed during the bridge within their limit across all security |
| End debt | A loan the business can carry, or a credible bank refinance afterwards |
| The sale | Contract (closed) or a realistic listing plan and price evidence (open) |
| The purchase | Contract, settlement date, deposit paid, stamp duty estimate |
| Purpose and borrower | Business use, ABN, ID, existing loan statements |
What does bridging finance cost?
Bridging is priced as short-term, property-secured lending: more than a standard long-term loan, less than many unsecured alternatives for the same amount. Expect an establishment fee, valuations on both properties, legal and registration costs, interest (often capitalised) and possibly a discharge fee.
The best defence against cost is time. Every month the bridge runs, capitalised interest grows, so price the property to sell, prepare it properly and keep the term short. Compare offers in total dollars with our loan cost comparison calculator.
Pros and cons at a glance
In its favour: you don’t miss the right property, you avoid a rushed sale at a discount, you settle on time, and capitalised interest protects cash flow during the move.
Against it: cost if the sale drags, the risk of selling for less than estimated (which raises end debt), two sets of holding costs, and possible land tax overlap.
Alternatives to consider
- Negotiate a longer settlement on the purchase, or a delayed settlement on the sale.
- Sell first and lease back or rent short term; see sale and leaseback.
- A caveat loan for a short, smaller gap such as a deposit or a shortfall; our bridging vs caveat loan comparison explains the differences.
- A bank bridging facility if you’re an established client with strong financials. Ask your bank early; it may well be the cheapest option.
For a purpose-first view, read bridging until a property sells.
Getting the overlap funded
The businesses that bridge well are the ones that do the sums before they sign the purchase contract. If you know your peak debt, your end debt and a realistic sale date, you’re most of the way there.
Our team looks at overlaps like this regularly. The form is short (about a minute) and making an enquiry doesn’t affect your credit file in any way. Nobody outside our team gets a copy; a person reads it, works out the likely structure and calls you. Please give us honest estimates for both properties and both settlement dates, because accurate inputs are what make the first suggestion the right one.
Frequently asked questions
What is bridging finance for a business?
It's a short-term loan secured by property that funds the gap between two events, usually buying a new property before an existing one sells. Businesses use it to secure new premises, settle on time when a sale is still pending, or meet a deadline while waiting for a large payment or refinance.
How long can a bridging loan run?
Most run from a few weeks to around twelve months. Lenders want a clear end date tied to a sale or refinance. If the sale takes longer than expected, some lenders will extend, usually at a cost, so a realistic sale timeline matters.
What is peak debt?
Peak debt is the highest amount you'll owe during the bridge: your existing loan, the new purchase price, stamp duty and costs, plus any interest that's added to the balance. Lenders check that peak debt fits within their loan-to-value limit across the security.
Do I have to make repayments during the bridging period?
Not always. Many bridging lenders capitalise the interest, adding it to the loan so it's paid from the sale. That eases cash flow, but the balance grows each month, so a delayed sale costs real money.
What's the difference between open and closed bridging?
A closed bridge has a firm sale already exchanged with a known settlement date. An open bridge has no sale yet. Closed bridges are lower risk for the lender and easier to approve; open bridges usually need more equity and a realistic sale plan.
Is bridging finance the same as a caveat loan?
They overlap. A caveat loan is one way to structure a short bridge quickly. Larger or longer bridges are often done with registered mortgages over one or both properties. The right structure depends on the amount, the timeline and the existing lending.