What is bridging finance?
Bridging finance is a form of short-term lending designed to provide temporary capital during a transitional period in a property transaction. It is commonly used when there is a timing gap between the purchase of a new property and the sale of an existing one, or when a borrower needs to settle quickly before longer-term financing is arranged.
In Australia, bridging loans are typically secured by a registered mortgage over real property and have terms ranging from one to twelve months. They are used by property developers, investors, and businesses who require fast access to capital for time-sensitive opportunities.
When is bridging finance used?
Common scenarios for bridging finance include purchasing a new property before an existing property is sold, securing a site at auction where settlement is required within a short timeframe, providing working capital during the period between loan approvals, and funding short-term obligations while awaiting the completion of a sale or refinance.
For property developers, bridging finance may be used to acquire a development site while awaiting formal construction finance approval, or to complete a project when the existing facility has reached its term limit and needs to be rolled over.
How are bridging loans assessed?
Bridging loans are typically assessed based on the quality and value of the security property, the borrower’s capacity to repay within the agreed term, and the clarity of the exit strategy. The exit strategy is particularly important because the loan is short-term by design. Lenders need confidence that the borrower has a realistic plan to repay the loan, whether through the sale of a property, the settlement of a longer-term facility, or another identifiable source of funds.
Non-bank bridging finance
Non-bank lenders play an important role in the Australian bridging finance market because of their ability to assess and approve applications quickly. Where traditional banks may require several weeks for credit approval, non-bank lenders can often provide indicative terms within days and settle within one to two weeks, depending on the complexity of the transaction.
Related resources from Granor Capital
Bridging finance is often used alongside property development finance. Read more about non-bank lending in Australia and how to apply for a development loan. Discuss your financing needs with Granor Capital.
This article is provided for general information purposes only and does not constitute financial advice.
