A delayed property sale or refinance can create a funding gap when an important deadline cannot wait. Bridging finance can provide the short-term funding needed to cover that gap and keep the transaction moving.
This guide by the team at Pronto Funds breaks down what bridging finance is, how it works and how businesses can use it to manage short-term funding needs.
What is bridging finance?
Bridging finance is short-term funding designed to cover a temporary gap between an immediate financial commitment and an expected source of repayment. It provides access to funds when they are needed, with the loan repaid once the planned exit takes place.
For example, a borrower may use bridging finance to settle a property purchase before another property is sold, then repay the bridging loan from the sale proceeds.
Bridging loans are commonly secured against residential, commercial or other eligible real estate. The amount available will depend on factors such as the property value, existing secured debt, funding requirements and the proposed exit strategy.
How does bridging finance work?
The process starts with understanding the funding requirements and the deadline. The lender then assesses the available property security, the purpose of the loan and how the borrower plans to repay it.
A typical bridging finance application involves five main stages:
- The funding need is outlined: The borrower explains how much is required, what the funds are for and when settlement needs to occur.
- The security is assessed: The lender reviews the property, available equity, ownership, location and existing debt.
- The exit strategy is confirmed: The borrower sets out how the loan will be repaid, such as through a property sale, refinancing or another identifiable source.
- The loan requirements are confirmed: The lender outlines the documentation, conditions and settlement requirements needed for the loan to proceed.
- The loan is repaid: Once the planned exit occurs, the bridging loan is repaid within the agreed term.
Bridging finance can be arranged before a secured property or another asset is sold, helping borrowers access the funding they need while awaiting sale proceeds or longer-term finance.
What is bridge financing in business?
Bridge financing gives businesses access to short-term funding when there is a timing gap between an immediate financial need and an expected source of repayment.
Bridging finance can support commercial property finance needs and other time-sensitive business requirements, such as:
- Maintaining working capital while awaiting a property settlement
- Clearing ATO debt ahead of refinancing
- Purchasing commercial property when settlement cannot wait
- Releasing property equity for an immediate business need
- Managing a cash flow gap while awaiting a major payment
A clear exit strategy remains an important part of business bridging finance. This may involve a property sale, refinance or another identifiable source of funds that can repay the loan within the agreed timeframe.
Bridge loan explained: how it differs from a standard short-term loan
While bridging finance is a type of short-term loan, there are some important differences between the two.
|
Bridging finance |
General short-term loan |
|
|
Main purpose |
Covers a temporary gap between an immediate funding need and an expected source of repayment. |
Supports a broader range of short-term business needs |
|
Typical repayment source |
Property sale, refinance or another defined payment |
Business cash flow, scheduled repayments or another agreed source |
|
Security |
Commonly secured against property |
Security requirements depend on the loan |
|
Repayment approach |
Based around a clear and identifiable exit strategy |
Based around the broader borrowing purpose and agreed repayment plan |
The key difference is the repayment strategy. Bridging finance is typically linked to an identifiable future event, such as a property sale or refinance, that will provide the funds to repay the loan.
Apply for bridging finance with Pronto Funds
At Pronto Funds, we use our own capital to assess bridging finance applications directly. This allows us to communicate clearly, make commercially focused decisions and tailor funding around your available security, required amount and exit strategy.
Eligible borrowers can access $200,000 to $10 million in short-term, property-backed funding. We can provide an indicative decision within 24 hours and have the ability to settle approved bridging loans within 48 hours, subject to all required documentation being provided.
Apply today to discuss your scenario with the Pronto Funds team and find out whether bridging finance is suitable for your funding needs.