Bridging Finance Loans in Australia

Bridging finance loans in Australia (or Bridging finance) is a method, which allows to purchase/finance assets before a formal loan is approved. It is a quick way to get hold of the investment while still waiting for the bank to grant the money. The borrower often needs money quickly as there might be not enough time for the formal approvals.

Therefore, bridging finance loans have a high risk for the lender. The high risk means that the borrower is charged a higher interest rate. Often, the interest is as high as 100% of the standard banking rates. There are two types of bridging loans:

  • Closed bridging loans
  • Open bridging loans

The closed bridging loans stipulate the date by which the borrower will repay the loan. The open bridging loan does not have an exact exit date. Therefore, close bridging loans offer less risk to the lender and thus carry lower interest rate. The open bridging loans are of the higher risk and are usually requested by investors who are still looking for the land or property.

Is The Bridging Finance for Me?

Bridging finance in Australia is only applicable for investments, which must be purchased immediately before a formal bank loan is obtained. Thus, the borrower must be sure that both the investment is worth the risk and that bank will eventually grant the money. The situations vary and often apply to large corporations.

For example, land developers may still wait for the permit but they need to secure funds to carry pre-construction works. Once the permit is granted, they approach formal banking institutions to obtain the low interest loan. Meantime (thanks to the bridging loan), the necessary works have already been completed speeding the project ahead.

Another situation could be a property, which needs to be settled quickly. The investor knows that banks will provide the finance but he cannot wait for the formal approval. In this case, bridging loan will secure the investment. Banks will later refinance the loan but on much lower interest rate.

Bridging Loan Lenders

The ordinary banks usually do not provide the bridging finance in Australia (except for home loans). The high risk of bridging finance loans often is unacceptable to the board of directors or share holders of banking institutions. However, there are specialised lenders who succeeded in the business of the bridging finance in Australia:

  • Bridging Finance Australia Wide offers loans from $10 to $10 Million. They specialise in closed bridging loans with 30-90 days duration. The company delivers money within 24-72 hours. However, there are strict conditions towards securities and the actual investment.
  • ANZ is one of the exceptions where the actual bank provides bridging loans. This lender offers flexible repayments, interest only during the bridging finance period and refinance to the ordinary low interest loan. ANZ has a good reputation and for many should be a bridging lender of choice. This is particularly true for under $1 million investments.
  • eChoice and National Australia Bank also provide bridging loans but mainly as home loans. This is intended only to cover the gap between settlement and the purchase.
  • NCF Financial Services (same as Bridging Finance Australia Wide) delivers closed bridging loans for various applications. The company also offers short-term finance and mortgage loans.