Caveat bridging finance: covering the gap between two events

Businesses rarely run short of value. They run short of timing. The premises you want come up before your old ones sell; the client pays 60 days after you’ve paid your trades; the refinance is approved but won’t settle until after the ATO’s deadline. Bridging finance exists for exactly this gap, and a caveat is often the fastest way to secure it.

How does caveat bridging finance work?

Picture a bridge with two ends:

• The near end is the payment you have to make now: a deposit, a settlement balance, a supplier, a tax debt.
• The far end is the event that repays the loan: a property sale, a refinance, a receivable.

The caveat loan spans the gap. It’s secured by a caveat over property with enough equity, interest is usually prepaid or capitalised so there’s nothing to pay during the bridge, and the whole balance is repaid in one hit when the far end arrives.

Which bridges does a caveat suit?

Bridge	Near end	Far end	Why a caveat suits it
Buy before you sell	Settlement on new premises	Sale of existing property	Fast set-up; existing mortgage untouched
Project gap	Materials, trades, mobilisation	Client payment or progress claim	Short and dated
Tax gap	ATO debt due now	Refinance, refund or asset sale	Direct payment to the ATO possible
Business purchase	Completion payment	Bank settlement or vendor finance arrangement	Covers delays in the main funding
Refinance delay	Old lender demanding payout	New lender’s settlement	Stops a default while the refinance completes

How do you size a bridge?

Work backwards from the far end.

1. Estimate the exit’s net proceeds. For a sale: price minus commission, marketing, legal costs and the payout on any first mortgage.
2. List what the bridge must repay. Principal, capitalised or prepaid interest and fees, and exit costs.
3. Check the gap between the two. If the net proceeds only just cover the bridge, you have no buffer.
4. Check the combined LVR on the security. See how much you can borrow.

Illustrative example

Illustrative only.

A Toowoomba engineering firm is buying a larger workshop for $1.1m. The bank has approved 70% of the purchase but won’t fund the balance until the firm’s existing workshop sells. The existing workshop is worth about $750,000 and carries a $200,000 loan.

• Near end: $330,000 balance plus costs due at settlement.
• Far end: sale of the old workshop. After the $200,000 payout and selling costs, net proceeds of roughly $520,000.
• Bridge: about $350,000 including costs, secured by a caveat over the old workshop.
• Combined LVR on the old workshop: ($200,000 + $350,000) ÷ $750,000 ≈ 73%. Tight — so the owners add a caveat over a residential investment property to bring the position down, and choose a term that allows for a slow sale.

The bridge works because both ends are real and the owners planned for delay.

Mapping your own bridge? The Feasibility Checker tests equity and exit together, or ask us to size it with you.

What are the risks in a bridge?

• The far end moves. Sales take longer, prices come in lower, receivables slip. Build in a buffer and a fallback exit.
• Both properties are exposed. In a buy-before-you-sell bridge, you’ll briefly own both and owe on both.
• Costs accumulate. Each extra month adds interest. See the costs page.
• Market shifts. A falling market squeezes the equity that was supposed to repay the bridge.

How is a caveat bridge different from a bank bridging loan?

Bank bridging products exist, but they’re usually built around home buyers, involve the bank taking security over both properties and follow the bank’s timelines and assessment. A caveat bridge is a business-purpose facility that can be set up quickly, sits behind existing mortgages and focuses on equity and exit. It usually costs more per month, so it’s best when time or flexibility genuinely matters.

What does a bridge need on day one?

To set up a caveat bridge quickly, have these ready:

1. Both ends in writing. The contract, invoice or notice that creates the payment, and the evidence of the exit (a listing agreement, sale contract, approval or invoice).
2. Payout figures on every loan secured over the properties involved.
3. A realistic value for the security property — a recent appraisal is fine to start.
4. Settlement or payment details, including who the funds should go to and when.
5. Everyone who needs to sign, available and aware.
6. Your fallback. If the far end moves, what’s plan B? Lenders are far more comfortable when you’ve already thought about it.

With those in hand, a bridge can move at the pace of the deadline. Without them, the bridge waits on paperwork. Our documents checklist has the fuller list.

Ready to plan your bridge?

Tell us both ends — what’s due, when, and what repays it — and we’ll tell you whether a caveat bridge is the right fit.

There’s no credit check for enquiring and it takes about a minute. We don’t circulate your details among a panel of funders; a specialist assesses your bridge and calls you. The more exact your figures for the sale price, payouts and dates, the more useful that call will be.

Plan your bridge with a specialist →