Bridging
When bridging finance beats a bank extension
A settlement date that will not move is a different problem to a shortfall of capital. Here is how to tell which one you are solving, and which fix actually clears in time.
Most borrowers who call us about a bridge have already asked their bank for an extension. The request is reasonable and the bank is not being unreasonable in return - it simply cannot re-run a full credit assessment inside the time left before settlement. The two products are solving different problems, and picking the wrong one is usually a timing error rather than a pricing one.
The question is time, not cost
A bank extension is cheaper on paper and will almost always win a rate comparison. That comparison only matters if the extension lands before the contract date. Where a borrower has three weeks and an incomplete income file, the honest choice is between a short private facility that settles and a cheaper facility that does not exist yet.
- Fixed, non-negotiable settlement date - bridging is usually the only option that clears it
- Flexible date and complete financials - an extension or refinance will cost less
- Security is sound but income evidence is thin - bridging assesses the property, not the payslip
- Deal needs more than 75% LVR - neither product solves it; the gap is equity, not funding
What a bridge is genuinely good at
Bridging finance buys a decision window. It converts a hard deadline into a manageable one, which is valuable when the exit is already visible - a property under contract, a refinance in progress, or a business sale close to completion. The facility is short by design and priced for speed, so the exit should be identified before the loan is written, not discovered afterwards.
A bridge should be the shortest line between a deadline and a known exit. If the exit is a hope rather than a plan, the loan term is the wrong tool.
Where it goes wrong
The failure pattern is almost always the same: a short facility written against a vague exit, then extended, then extended again. Interest accrues against a stationary asset and the equity that made the deal work in the first place erodes. Before drawing, put a date and a mechanism on the exit and stress it - if the sale takes four months rather than two, does the facility still clear comfortably?
Used deliberately, a bridge is a scheduling instrument. Used as a substitute for equity, it is an expensive way to postpone the same conversation. The distinction is worth being blunt about before the paperwork starts.
General information only
This article is general in nature and does not take your circumstances into account. It is not financial or credit advice. Alphacon Capital writes business-purpose loans secured by property.
