Quick answer
Short-term business loans and bridging finance cover a gap between needing money now and receiving it later, such as from a property sale, a refinance, a big contract payment or an insurance claim. Terms usually run from a few weeks to a couple of years. They're most often secured on property, assessed on equity and the exit, and can be arranged quickly when banks can't help in time.
Key points
- Bridging finance is built around a known future event: the exit.
- Terms are short, from a few weeks to around two years.
- Usually property-secured, from $20,000 to $5,000,000.
- Interest can sometimes be capitalised so there are no monthly repayments.
- Range
- $20k – $5m
- Typical term
- Weeks to 2 years
- Key requirement
- A clear exit
- Credit check to enquire
- None
Business is full of timing problems. You’ve sold a property, but settlement is three months away. You’ve been approved for a bank refinance, but the bank needs six weeks. A big contract will pay in January, but the costs are now. An insurance claim has been accepted, but the money isn’t here. Short-term loans and bridging finance exist for exactly these gaps, where the money is coming, just not soon enough.
How bridging finance works
- You identify the exit. The future event that will repay the loan, with evidence.
- A lender assesses the security and the exit. Usually property, plus documents proving the exit is real.
- The loan is structured to match. The term is set to the expected date, with a buffer for delays.
- You use the money now. For the business purpose you need.
- The exit arrives and repays the loan. Sale proceeds, refinance funds or a contract payment clear the balance.
Common exits lenders accept
| Exit | Evidence lenders want |
|---|---|
| Sale of a property | Signed contract of sale, settlement date |
| Sale of a business or asset | Signed sale agreement |
| Refinance to a bank | Formal or conditional approval, timeline |
| Large contract payment | Signed contract, payment schedule, customer details |
| Insurance claim | Claim acceptance and expected payment |
| Harvest or livestock sale | Forward contracts, yield and stock records |
| Tax refund | Lodged return and ATO notice |
The stronger the evidence, the easier the approval and the better the terms.
When short-term finance fits
- A business or property purchase settles before your own sale does
- You need to clear a debt before a refinance can complete
- A contract needs working capital before its first payment
- A farm needs inputs before harvest. See farm business loans.
- Cash flow has stalled but a big payment is confirmed. See no cash flow.
When it doesn’t
If there’s no clear exit, a bridging loan becomes a long-term problem with short-term pricing. Funding ongoing losses with a bridge rarely ends well. For long-term needs, a second mortgage with a longer term or a structured facility usually fits better.
Capitalised interest
Many bridging loans let interest be capitalised (added to the loan balance) or prepaid (deducted from the loan at the start), so there are no repayments during the term. That’s useful when cash is tight, but the amount owed at the end is larger. Make sure the exit covers the full amount, including capitalised interest and fees.
An illustrative example
A Ballarat engineering firm (illustrative only) agreed to buy a larger factory, with settlement in eight weeks. Its existing factory was under contract for sale, but settlement there wasn’t for five months. The bank would only fund the new purchase once the old factory was sold. A private lender provided a six-month bridging loan secured over both properties, with interest capitalised. The firm moved into the new factory on time, and the sale of the old factory repaid the bridge in full.
What makes a strong bridging application
Lenders approve bridging loans fastest when three things line up: plenty of equity in the security, an exit that’s documented and close, and a purpose that clearly makes sense. A signed, unconditional contract of sale with a settlement date is about as strong as an exit gets. A refinance approval with only routine conditions left is close behind. A contract payment that depends on future work being completed is weaker, and the lender will want to see progress and the customer’s payment record.
Build in a buffer. Settlements slip, banks take longer than promised, and customers pay late. A term with a few months of margin past the expected exit usually costs little extra and avoids an expensive extension or a default at the worst possible time.
Questions to ask before you sign
- What is the total cost in dollars, including all fees and interest?
- Is interest capitalised, prepaid or paid monthly?
- What happens if the exit is delayed, and what does an extension cost?
- Are there early repayment fees?
- What exactly triggers a default?
Choosing the security
Bridging loans are usually secured on property, but the choice of which property matters. Using the property being sold can be simplest, since the sale repays the loan directly. Using a different property, such as the family home or an investment unit, can give a lender more equity to work with but puts that property at risk if the exit falls over. A good lender will explain the options and their consequences, and your own lawyer should review the documents before you sign.
Bridge the gap
If the money is coming but not soon enough, tell us about the gap. There’s no credit check when you first enquire, your details aren’t sent to a long list of lenders, and a real person will look at your security and exit and tell you what’s possible. Please be accurate about the timing and evidence of your exit on the form so we can structure the right loan. See if you qualify.
Frequently asked questions
What is bridging finance for a business?
It's a short-term loan that bridges the gap until expected money arrives, such as from selling a property, refinancing, a contract payment or an insurance claim. The expected money is the exit that repays the loan.
Do I need to make repayments during the term?
Not always. Some bridging loans let interest be capitalised, added to the balance, or prepaid from the loan, so there's nothing to pay until the exit. That helps cash flow but increases what's owed at the end.
What if my exit is delayed?
Talk to the lender early. Many will extend for a fee if the exit is still on track. Delays without communication can trigger default terms, so check the extension and default clauses before you sign.
Is a short-term loan the same as a caveat loan?
A caveat loan is one type of short-term loan. Short-term and bridging loans can also be secured by registered first or second mortgages, which may suit longer terms or larger amounts.