Commercial Bridging Loans Australia

When a business requires short term finance for a large purchase or to move to new commercial premises, a commercial bridging loan could help. A commercial bridging loan is a type of a secured business financing. In this article, learn what a commercial bridge loan is, gain an understanding of commercial bridge loan rates and the commercial bridge loan lenders you can apply with today.

You can get a bridging loan arranged in less than 24 hours and the reassurance of borrowing from one of Australia’s leading bridging lenders.

How to find relevant offers?

Apply with Lend for a simple, fast & secure way to access business bridging finance. There is no impact on credit score and Lend will match businesses with the most appropriate business bridge loan lenders to their business circumstances.

Best Commercial Bridge Loan Lenders on the Lend Platform

#1 Banjo Business Loans

  • Commercial Bridge Loan from 2-6 months
  • Interest paid with principal on maturity
  • Loans from $20k – $500k
  • Rated 4.8 / 5 – ‘Excellent’ on Trustpilot
  • Award-winning commercial bridging finance provider

#2 Strive Financial

  • $20,000 – $3,000,000 Business bridging finance available
  • Security required – first/second mortgage or asset
  • Detailed financials not required, security more important
  • Providing business bridging loans since 2003

#3 Speedy Business Finance

  • Secured interest-only bridging loans up to $250k
  • 3-6 month loan terms
  • Property required
  • Fixed rate starting at 2% per month
  • Paid defaults OK

#4 HomeSec Business Finance

  • Business bridging loans specifically for property purchases
  • Maximum 75% loan to property value
  • 1-6 month loan term on business bridging facility
  • Approved applications within 2 hours

 

What is a Commercial Bridge Loan?

A business bridging loan is a short-term financing option which is used when there is a gap in financing that needs filling quickly, similarly to a caveat loan. Bridge loans are an interim source of finance before a more permanent financing solution is found, i.e. a commercial bridge loan helps to ‘bridge’ a payment gap.

Commercial bridge loans are primarily used for commercial real estate purchases to quickly close on a property. As an example, a business may not have the funds to purchase new commercial premises until they have sold their existing one, though selling before the purchase of another one could cause severe disruption to the business. The bridging loan provides access to cash during this transition period to fund the purchase of the new premises. Bridge loans on a property are typically repaid when a property is sold or when new finance such as a commercial mortgage is agreed.

In most cases, property is used as security for the loan but bridging finance can also be used to fund the purchase of key business assets, for example yellow goods and heavy equipment. It can be difficult to precisely match up the sale of an old asset with the purchase of a new one. The bridging loan provides access to cash during this period to fund the purchase of a new asset before the old asset is sold. Any form of asset can be used to secure the loan, property is just the most common.

Properties Eligible for Commercial Bridging Finance

A wide number of commercial properties can be financed through a bridging loan, including:

  • Retail locations, such as restaurants and shops
  • Offices
  • Warehouses
  • Factories
  • Working farms, including land
  • Hotels
  • Pubs, nightclubs
  • Care homes
  • Business Parks
  • Residential investments
  • Semi-commercial properties (commercial property use usually has to be 40% / 50% of buildings total use)

Commercial Bridge Loan Rates

Commercial bridge loans are a short-term financing solution that normally have slightly higher interest rates than conventional mortgages. This reflects the increased lender’s risk due to the uncertainty of the existing property’s pending sale. It’s worth noting commercial property is usually less liquid than residential property, further increasing lending risk too.

Due to the short-term nature of bridging loans, interest rates are normally presented as monthly as opposed to annually. As a guide, an interest rate of around 1% per month is a good benchmark. Bridging Loans can begin at around the 0.5% mark but for riskier applications, which could be due to the property or borrower in question, rates can be around 1.5% per month.

Most lenders will also charge an arrangement fee, which is usually around 2% of the loan amount. An early exit fee is also sometimes charged, though it might be worth looking to negotiate this if you don’t know exactly when a property sale is due to complete or when new finance is due to land.

Pros and Cons of Bridging Finance for Companies

ProsCons
✓ Take advantage of immediate opportunities that you may lose out on waiting for the sale of an existing property.

✓ Borrow against asset value, not just credit score.

✓ Loans are generally processed quickly.

✓ Second mortgage possible, if you have an existing mortgage bridging lenders can still lend against available equity in your property.

✕ Generally more expensive than standard mortgage.

✕ Property valuation likely required, incurring extra fees.

✕ Could face issues if unable to sell existing property prior to expiration of the terms of the business bridging loan. Clear exit strategy required.

Usual Terms for a Business Bridging Loan

Whilst the following may not apply to every lender, the general terms on a commercial bridge loan are as follows:

  • Up to 70% / 80% loan to value ratio of property
  • Interest usually charged on a monthly basis
  • Terms usually up to 12 months (some lenders offer up to 24)
  • Adverse credit usually accepted (property/asset used to secure loan most important)
  • Loans with no early repayment charges available
  • Most exit routes are considered but will have to be able to prove one is there
  • Loans available throughout Australia
  • Semi-commercial property accepted

Difference Between a Commercial Bridge Loan & Commercial Mortgage

Bridging loans have a much shorter lifespan and are much quicker than a commercial mortgage to complete. Whilst a commercial mortgage might run over many decades, the terms on a commercial bridge loan are capped at 12-24 months.

To qualify for a bridging loan, a clear exit strategy is required and businesses must be able to demonstrate a way to repay the loan within a short timeframe. To qualify for a commercial mortgage, borrowers will have to be able to demonstrate the ability to repay a smaller amount over a longer period of time.

If your business is eligible for a commercial mortgage and you’re not in a hurry to secure financing, it might make financial sense to wait for a commercial mortgage. The interest rate is most likely going to be lower than a bridging loan.

Commercial Bridging Loan for Property Development

A commercial bridge loan can be used to renovate a commercial property, similarly to a construction loan. In fact, property developers looking to purchase property that needs significant renovation may find a bridging loan easier to access than a commercial mortgage. Mortgage lenders are likely to be less willing to provide the financing required if a property requires significant renovation. Bridging lenders are used to taking on more risk, so in turn for a higher interest rate, are more likely to provide the financing required.

Once the renovation is complete, the property developer can then switch to a commercial mortgage if they intend to lease out the property or sell it and repay the bridging loan.

Final Comment: Is a Bridging Loan Appropriate for my Business?

If you have commercial property with available equity and need to access funds fast on a short-term basis, then a commercial bridge loan could be for you. Commercial bridge loan lenders are used to taking on more risk than commercial mortgage lenders, so riskier borrowing profiles and properties requiring renovation may find commercial bridging finance easier to access. Due to the increased risk, commercial bridge loan rates are likely to be higher than that through a mortgage