When the gap is the problem
A lot of broker deals don't fail because the client is a bad risk. They fail because of timing. The bank will probably approve, but not this week. The property is sold, but settlement is three months away. The contract is signed, but the first payment doesn't arrive until the job is half done. In each case the client has a good outcome coming and a deadline that arrives first.
Bridging finance fills that gap. Equity Tap lends from $50k to $5m for one to twelve months, secured by a first mortgage, second mortgage or caveat over residential or commercial property anywhere in Australia. The loan is repaid when the expected outcome lands.
Caveat or bridging loan: what's the difference?
Brokers use the terms loosely, so here's how we think about them.
- A bridging loan describes the purpose: short-term money to bridge from now to a known exit. It can be secured by any of the three security types.
- A caveat loan describes the security: we lodge a caveat on the property title to protect our interest, rather than registering a mortgage. It's often chosen when speed is the priority and the need is short.
So a caveat loan is usually a type of bridging loan, but not every bridging loan uses a caveat. Your client's business owner guide to the trade-off is caveat loan vs second mortgage.
Choosing the right security for the deal
| Situation | Often suits | Why |
|---|---|---|
| Funds needed in days, short term | Caveat | Fast to put in place, no change to the existing mortgage |
| Existing first mortgage worth keeping, need runs several months | Second mortgage | Registered security behind the first, first mortgage untouched |
| No existing debt, or the existing lender is being repaid | First mortgage | Cleanest security, often the biggest amount available |
| Property sold, waiting on settlement | Caveat or second mortgage | Repaid from the sale proceeds on settlement |
| Bank refinance under way but slow | Second mortgage or caveat | Repaid when the refinance settles |
We'll suggest the structure that fits once we know the scenario, and we'll explain why. Read more on caveat loans and business bridging loans.
What a bridging deal needs from you
The single most important thing in a bridging deal is the exit. The loan exists to get the client to an outcome, so we want to understand that outcome and its timing:
- Refinance exit: the bank or lender, where the application is up to, and any approval or conditions.
- Property sale exit: the contract of sale, the settlement date and the expected proceeds after existing debt.
- Business sale exit: the sale agreement and expected completion.
- Receivables or contract exit: invoices, a contract schedule or progress claim timing.
- Insurance exit: the claim acceptance and expected payment.
On top of that we need ID, property and existing mortgage details, and the purpose. We don't need tax returns, BAS, profit and loss, an accountant's letter or bank statements, and we don't order a valuation before approval.
For example
For example, a broker's client has sold a warehouse with settlement set for four months away, and needs funds now to secure a new site before another buyer does. The bank won't lend against a property under contract. A bridging loan secured over the sold warehouse covers the deposit and costs, with interest added to the loan so there are no repayments, and is repaid from the sale proceeds on settlement. See also our property sale advance page.
Another common one: a client is mid-way through a bank refinance that will release equity to pay a tax debt, but the ATO deadline falls before the refinance can settle. A short caveat loan pays the ATO now and is cleared when the refinance completes. Our page on clients with ATO debt covers this in more detail.
Keeping repayments off the client's plate
Bridging clients usually have their cash flow committed elsewhere, so payments during the loan can be the sticking point. Interest for up to the first six months can be prepaid or added to the loan, so there are no scheduled payments during that period. Interest isn't waived, and the client sees the full cost before proceeding.
Speed, and who you deal with
There's no credit committee. Once we have the scenario, conditional approval can often be given on the phone and a term sheet issued in about 30 minutes. Eligible loans can settle in as little as 24 hours. You deal with the same lending team from first call to settlement, and you stay the client's broker for the long-term finance.
Talk to us about the deal
Each loan is priced on the client's individual circumstances, aiming for the sharpest rate available for that situation. Call 1300 123 024 or start at apply. If the client's refinance is the thing dragging, see client refinance taking too long.
Business-purpose lending only. Approval, timing and terms depend on the scenario.
Frequently asked questions
Is a caveat loan the same as a bridging loan?
When would you use a caveat rather than a second mortgage?
Can you lend against a property that's already under contract of sale?
How long can a bridging loan run?
Does my client have to make repayments while waiting for the exit?
Do you need a valuation or financials?
How fast can a caveat loan settle?
Brokers: send the scenario through the Equity Tap broker channel and you will deal with the same lending team.