Commercial Bridging Finance: How to Bridge the Gap
Commercial bridging finance to bridge property transactions for business owners – Switchboard Finance
Glossary Deep-Dive #30
Commercial Bridging Finance: How to Bridge the Gap Between Property Transactions
What Commercial Bridging Finance Actually Is
Bridging finance is a function: short-term funding that bridges the timing gap between buying a new property and settling or refinancing an existing one. It is not a product name — there is no product called "bridging finance" that banks or brokers stock on a shelf.
In the commercial property space, the bridging function is delivered through two main structures: caveat loans and private lending. Both are short-term, asset-backed facilities designed to hold you over until a permanent funding solution settles in place.
When Bridging Works
- Exit strategy is proven (sale date, refinance approval letter, or settlement confirmation)
- You own property with equity available to secure against
- Bridge duration is short (weeks to 4-6 months typically)
- Transaction is time-critical (auction, off-market deal, or settlement mismatch)
- Lender can assess risk based on clear security and exit
When Bridging Stalls
- Exit strategy is vague or dependent on a future refinance approval
- No equity available or property is unencumbered but illiquid
- Bridge duration creeps beyond 12 months
- Property on market but no genuine sale interest
- Borrower cannot demonstrate repayment capacity beyond equity release
How Caveat Loans and Private Lending Serve as Bridging Pathways
Since Switchboard does not offer standalone bridging finance as a product, the practical pathways for business owners are caveat loans and private lending facilities. Both can function as bridging tools, but they operate under different mechanics and risk profiles.
| Attribute | Caveat Loan Bridge | Private Lending Bridge |
|---|---|---|
| Security | Registered caveat against your property (second position common) | First or second mortgage, or bill of sale on assets |
| Typical Term | 3–6 months; extended up to 12 months in some cases | 3–12 months, flexible renewal based on lender appetite |
| Interest Cost | Illustrative 8–12% p.a., charged monthly or upfront | Illustrative 7–14% p.a., varies by lender and risk profile |
| Approval Speed | 5–10 business days if property appraisal available | 3–7 days; less paperwork-heavy than bank lending |
| Exit Strategy Flexibility | Sale, refinance, or equity release; caveat removed on settlement | Sale, refinance, or asset liquidation; mortgage discharged on payout |
Caveat loans are a first-port call for commercial property bridging because they sit between the property and any existing mortgages. Private lending offers more flexibility on structure and can be faster to access, but typically carries higher interest cost. Neither is a true "standalone bridging" product — both require genuine security and a clear exit.
Typical Bridging Scenarios for Business Owners
Bridging is most useful when timing misalignment creates a bind. Here are four scenarios where business owners use caveat loans or private lending to bridge:
- Buying Before Selling: You have found a commercial property you must acquire within 10 days, but your current property won't sell for 8–12 weeks. A caveat loan or private lending facility covers the deposit and early settlement, then is repaid from your existing property sale proceeds.
- Development Deposit Timing: A development project requires a 15% deposit within 2 weeks to hold the site. Your refinance application is in progress but won't settle for 6 weeks. Private lending or a caveat loan bridges the gap between deposit due and refinance funds available.
- Auction Settlement Mismatch: You win an auction with a 30-day settlement, but your sale is not scheduled to complete until week 6. A short-term bridge covers the 14-day overlap.
- Settlement Gap on Portfolio Growth: You are buying a third property while your second is in escrow. Banks won't lend on the third until the second settles. A caveat loan against your existing secure property bridges the acquisition phase.
What Lenders Assess on a Bridging Deal
Bridging assessment is exit-driven, not income-driven. Lenders care far less about your serviceability than about whether you have a clear way to repay at the end of the bridge period.
Exit Strategy is the critical factor. You must demonstrate one of the following: a signed sale contract with a settlement date; a refinance approval letter or pre-approval from a traditional lender; evidence of development consent and a clear development timeline; or proof of asset liquidation (e.g., planned sale of inventory or equipment). A vague plan to "refinance when rates drop" or "find a buyer in the next 12 months" will not pass muster.
Loan-to-Value (LVR) on Both Properties matters. Lenders will appraise the property being used as security (often your existing property) and typically lend no more than 70% of its value. If you are bridging a purchase, lenders will also factor the new property's value into the overall facility structure. Total exposure is capped to manage risk.
Timeline Realism is assessed closely. If your exit strategy says the property will sell in 8 weeks but the market is moving slowly, lenders may discount that timeline or ask for a fallback plan (e.g., refinance with a bank or a second bridge extension). Bridges that extend repeatedly become problematic; most lenders expect you to exit within 4–6 months.
Sale Evidence strengthens your application. An auction result, a real estate agent's signed listing agreement, or a developer's letter of intent makes the exit real. Theoretical exits are treated sceptically.
For broader context on commercial property finance beyond bridging, explore our Business Loans Hub or consult our guides on commercial property loans, second mortgages for business owners, and development finance.
Frequently Asked Questions
Switchboard does not offer standalone bridging finance as a product. However, we can arrange caveat loans and private lending facilities that serve the bridging function. Both are short-term, secured options designed to bridge timing gaps in property acquisition and sale. Contact us to discuss your specific situation.
Caveat loans typically take 5–10 business days from application to settlement if property appraisal and documentation are in order. Private lending can be faster, sometimes settling in 3–7 days. Speed depends on how organised your exit strategy and security documentation are. A proven sale contract or refinance approval letter accelerates the process significantly.
If your sale doesn't settle or refinance doesn't approve, lenders expect you to have a backup plan. This might be a second bridge extension (if the lender agrees), asset liquidation, or finding alternative funding. Most lenders will not automatically extend a bridge without seeing new evidence of a realistic exit. Bridges are short-term tools; they are not meant to become permanent financing. ASIC guidance on credit licensing emphasises that short-term lending must have a clear repayment pathway.
Bridging cost varies by lender, security strength, and market conditions. Caveat loans typically cost illustrative 8–12% p.a. Private lending ranges illustrative 7–14% p.a. Some lenders charge interest upfront; others charge monthly. A 6-week bridge on $2M at 10% p.a. would illustratively cost approximately $23,000. Compare total cost (interest + fees) against the benefit of acquiring or settling your property on time.
Not quite. A bridging facility is short-term and exit-driven, designed to be repaid within weeks or months. A second mortgage is often medium to longer-term and may not have a hard exit date. Both are secured against property, but a bridge is tactical (solve an immediate timing problem) while a second mortgage can be structural (cover an ongoing financing need). Caveat loans and private lending facilities both function as bridges, but can also be structured as medium-term facilities if your situation warrants it.
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