In building, the timing of money rarely lines up. A house you’ve finished might take three months to sell, but the block for your next job needs to settle in three weeks. A refinance is approved in principle but won’t settle until after your trades need paying. Bridging finance exists to fill exactly that kind of gap.
This guide explains how business bridging loans work, the difference between open and closed bridging, the most common ways builders use them, and how to set one up so it doesn’t turn into a headache.
Key takeaways
- Bridging finance is short term money secured against property you already own.
- It’s repaid by a specific event: a sale, a refinance or a known payment.
- Closed bridging has a fixed exit date. Open bridging has an expected exit but no fixed date.
- Terms typically run from 1 to 12 months, and funding can happen in as little as 24 hours.
- The strength of your exit plan matters as much as the property.
How does a business bridging loan work?
The mechanics are simple.
- You identify the gap. For example, you need money now for a site, a job or a debt, and you’re expecting a sale or refinance later.
- You offer security. A property you or a guarantor already own: your home, an investment property, a completed spec house or land with equity.
- The lender values the security and checks what’s owed on it.
- The loan is set up as a first mortgage (if the property is clear or the existing loan is being paid out) or a second mortgage behind your existing loan. In Victoria, a caveat loan may also be an option.
- The exit event happens and the loan is repaid in full from the proceeds.
Because the focus is on the property and the exit, bridging loans don’t need tax returns or financials. Bad credit is considered.
Open vs closed bridging finance
| Closed bridging | Open bridging | |
|---|---|---|
| Exit | Fixed, such as an unconditional sale with a settlement date | Expected, such as a property listed for sale or a refinance in progress |
| Certainty for the lender | High | Lower |
| Typical term | Short, matched to the settlement date | Longer, with a buffer |
| What lenders want to see | The signed contract or formal refinance approval | A realistic plan, pricing evidence and a back up option |
| Common builder use | Settling on the next block while a sold house settles | Keeping work moving while a completed house is on the market |
Closed bridging is usually the easier file, because the repayment date is locked in. Open bridging is still very common, but you’ll need to show why the sale or refinance is realistic and what happens if it takes longer.
What do builders use bridging finance for?
- Buying the next site before the last one sells. The finished spec home is on the market and the next block needs to settle. See land purchase finance for builders.
- Finishing a build while waiting on a refinance. Construction funding has run dry, and longer term funding is weeks away.
- Paying out an expensive debt. An ATO debt or supplier account needs clearing now, and you’re selling a property to repay it.
- Holding stock. Completed townhouses are waiting to sell and holding costs keep coming.
- Releasing equity from a property that’s about to sell so you don’t miss an opportunity.
Our business bridging loans page covers each of these in more detail.
Bridging loan vs a standard second mortgage
The line between them is often blurry, and that’s fine. A bridging loan is defined by what repays it: a specific sale, refinance or payment. A fast second mortgage can be used for the same thing, or for a broader need like working capital. What matters is that the loan structure, term and exit match your situation. Our lending team sets it up the right way.
If the property you’re borrowing against has no loan on it, or you’re paying out the existing lender, a fast first mortgage may be cleaner and give you more to work with.
What do lenders look for in a bridging loan?
- Equity in the security property. What it’s worth now, less any existing debt.
- The exit. A signed sale contract, a refinance approval, or evidence of what similar properties are selling for.
- Timing. How long the exit should take, plus a buffer.
- Ownership. Who’s on title and who needs to sign.
- Purpose. What the money is for. Loans are for business or investment purposes.
Example: settling the next block before the spec home sells
Example only. A builder in Ipswich has just finished a spec home. It’s listed but not yet sold. He’s found a good block at the right price, but the vendor wants settlement in 30 days. He needs a hypothetical $450,000.
He owns the spec home outright. A bridging loan secured against it covers the new block. This is open bridging, because the sale isn’t locked in, so he shows recent sales nearby and agrees a six month term to leave room. When the spec home sells, the bridging loan is repaid from the proceeds.
Example: closed bridging while a sale settles
Example only. A small builder in Hobart has exchanged unconditional contracts on a townhouse she built, with settlement in eight weeks. Meanwhile, she needs money to start slab work on her next project.
Because the sale is unconditional with a settlement date, this is closed bridging. A short loan secured against the townhouse (and her home as extra security) covers the start up costs, and settlement repays it.
Risks to plan for
- The sale takes longer. Build a buffer into the term and have a back up, such as a refinance.
- The price comes in lower. Don’t count on the top of the range.
- Too many moving parts. Keep the loan tied to one clear exit where you can.
- Holding costs. Rates, insurance and interest continue until the exit happens.
Every loan is priced on your circumstances, and our lending team looks for the sharpest rate available for your situation.
Key facts
- Loan size: $20,000 to $5 million
- Security: existing property you or a guarantor own
- Speed: as little as 24 hours in some cases, typically a few days
- Term: typically 1 to 12 months
- Suits: builders and tradies waiting on a sale, refinance or large payment
What’s the next step?
Read our guide to planning an exit strategy for a short term loan, then see if you qualify in 60 seconds. Enquiring won’t affect your credit score and a lending specialist will call you back to talk it through.
