Quick answer
A bridging loan is short-term finance that covers the gap between buying one property and receiving the money from selling another, or between any purchase and a known future payout. It's secured over property, usually runs from a few months to around a year, and is repaid in one lump sum from the sale or a refinance. Interest is often added to the balance rather than paid monthly.
Key points
- Covers a timing gap and is repaid from a specific, expected payout
- Lenders size it on peak debt: everything owed while both properties are held
- End debt is what's left once the sale settles, and it must suit an ordinary loan
- The sale is the exit, so a realistic price and timeframe matter more than anything
Picture a business that has found the right new premises but hasn’t yet sold the old ones. A bridging loan is the short-term, property-secured finance that fills that gap, and it’s paid back in a single hit once the expected money arrives. The name says it all: it’s a bridge from one settlement to the next.
How does a bridging loan work?
Security is taken over the old property, the new one, or both. For the length of the bridge, you effectively carry two debts at once. When the old property settles, the buyer’s settlement money pays down the bridge, and whatever’s left becomes an ordinary loan or is cleared completely.
Two figures drive every bridging assessment:
- Peak debt: the most you’ll owe while holding both properties. That’s the existing loan, plus the purchase price, plus purchase costs such as transfer duty and legal fees, plus the interest expected over the bridge, less any cash you put in.
- End debt: what remains after the sale proceeds (net of agent and legal costs) are applied. Lenders want to see that the end debt fits a normal loan the business can comfortably service.
Because interest is often capitalised during the bridge, the peak climbs a little each month the sale drags on. That’s why lenders build a buffer into the term and value the property you’re selling conservatively.
Why bridging loans matter for business owners
Business property deals rarely line up neatly. A buyer may want a 90-day settlement on your old factory while the vendor of your new site wants 30. A business purchase may complete before the sale of an investment property. Without a bridge, you either lose the new deal or sell in a hurry at a weaker price.
The trade-off is cost and pressure. A bridge carries establishment and valuation fees, and every extra month adds interest. The sale is your exit strategy, so lenders scrutinise the price you expect and how long similar properties take to sell. The full product is covered on our bridging finance page.
If you’re weighing up a bridge right now, send us the basics and we’ll test the numbers with you.
Worked example: moving to a bigger warehouse
A joinery business owns a warehouse worth about $900k, with $400k still owing. It contracts to buy a larger warehouse for $1.2m, settling in six weeks. The old one is listed but not sold.
| Item | Amount |
|---|---|
| Existing loan on the old warehouse | $400k |
| Purchase of the new warehouse | $1.2m |
| Duty, legals and fees (estimate) | $75k |
| Interest expected over the bridge (estimate) | $60k |
| Peak debt | about $1.735m |
| Net sale proceeds of the old warehouse | $880k |
| End debt | about $855k |
Against $2.1m of combined property at the peak, the lender is comfortable. Once the old warehouse sells and $880k comes off, the business is left with roughly $855k owing on a $1.2m property, which a bank or non-bank lender can refinance as a standard commercial loan. If the sale took three extra months, the interest line would grow and the end debt with it. Our bridging loan calculator lets you run your own version.
Related terms
A bridge sits close to a caveat loan, and our bridging finance vs caveat loan comparison sets out when each fits better. See also loan-to-value ratio, which governs how far the peak debt can stretch, and our guide to funding a gap until a property sells.
Two settlements and not enough overlap?
When the timing between buying and selling won’t line up, a well-sized bridge keeps both deals alive. Tell us the two dates and the figures in our short form. It’s about a minute’s work, and a simple enquiry won’t register on your credit history. We won’t spread your enquiry across a heap of lenders; one of our people studies the deal and calls you back. Put in an honest estimate of the sale price and timing, since that’s what lets us find a lender who’ll accept the exit on the first attempt.
Frequently asked questions
How long can a bridging loan run?
Terms are commonly somewhere between a few months and about twelve months, and some private lenders go longer. The term should be set with room to spare beyond your expected sale date, because sales and settlements often take longer than planned.
Do I make repayments on a bridging loan?
Often not during the bridge itself. Many bridging facilities capitalise the interest, adding it to the balance so it's repaid when the property sells. Some lenders ask for interest to be paid monthly or prepaid at the start. Either way, the interest is a real cost and should be counted.
What happens if my property doesn't sell in time?
You'd need to ask the lender for an extension, refinance into another loan or reduce the asking price to sell. Extensions usually come with fees, and the balance keeps growing if interest is capitalised. Setting a realistic price from the start is the best protection.
Can a business use a bridging loan for something other than property?
The loan is secured by property, but the reason for the gap can be broader: a business acquisition settling before a property sale, a tax bill due before a confirmed payout, or a development waiting on strata titles. What lenders need is a clear, believable repayment event.
Is a bridging loan the same as a caveat loan?
Not quite. Both are short-term and property-backed, but a bridging loan is usually secured by registered mortgages and sized around a sale, while a caveat loan relies on a caveat over the title and is often used for smaller, faster needs.