What is Bridging Finance?

Complete guide to short-term bridging loans for NZ businesses and property buyers

Quick Answer:

Bridging finance is a short-term loan (1-12 months) that covers a temporary funding gap. It costs 8-15% p.a. in NZ and is commonly used when buying property before selling, or for urgent business cash flow needs. Banks offer limited bridging options; most NZ borrowers use non-bank lenders for faster approval.

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What is Bridging Finance?

Bridging finance is a type of short-term loan designed to "bridge" a temporary funding gap. It provides immediate access to capital while you wait for longer-term financing or the sale of an asset.

In New Zealand, bridging finance is most commonly used for:

  • Property purchases: Buying a new home before your current one sells
  • Business acquisitions: Completing a purchase while arranging permanent funding
  • Development funding: Covering costs before construction finance is available
  • Cash flow gaps: Managing timing differences between income and expenses

How Bridging Finance Works

Typical Bridging Loan Process:

  1. Application: Apply with property/asset details and exit strategy
  2. Valuation: Lender values security (usually property)
  3. Approval: 24 hours to 2 weeks depending on lender
  4. Settlement: Funds released, often within days
  5. Interest: Typically charged monthly or capitalised
  6. Exit: Repay when property sells or permanent finance settles

Most bridging loans in NZ are secured against property. The lender takes a mortgage (first or second) over your property as security. Loan-to-value ratios (LVR) typically range from 65-80% depending on the lender and property type.

Bridging Finance Costs in NZ (2026)

Cost Type Bank Non-Bank
Interest Rate 7-10% p.a. 10-15% p.a.
Establishment Fee 0.5-1% 1-2%
Valuation $500-$1,500 $500-$2,000
Legal Fees $1,000-$2,000 $1,500-$3,000
Exit Fee Usually none 0-1%

Example: A $500,000 bridging loan for 3 months at 12% p.a. would cost approximately $15,000 in interest, plus $7,500 establishment fee (1.5%), plus valuation and legal fees. Total cost: ~$25,000.

When to Use Bridging Finance

Good Use Cases

  • Buying before selling (with confirmed sale)
  • Auction purchases requiring quick settlement
  • Business opportunities with time pressure
  • Development pre-funding
  • Short-term cash flow with clear exit

When to Avoid

  • No clear exit strategy
  • Speculative property purchases
  • Long-term funding needs
  • When cheaper options available
  • Already stretched financially

NZ Bridging Finance Providers

Banks (Limited Availability)

ANZ, ASB, BNZ, and Westpac offer bridging finance but with strict criteria. Best for existing customers with strong financials and clear exit strategy.

Typical Rate: 7-10% p.a. | Max LVR: 80%

Non-Bank Lenders

Resimac, Basecorp, First Mortgage Trust, and others offer more flexible bridging options with faster approval but higher rates.

Typical Rate: 10-15% p.a. | Max LVR: 70-75%

Alternatives to Bridging Finance

  • Working Capital Loans: For business cash flow gaps (potentially cheaper)
  • Commercial Property Loans: For longer-term property financing
  • Bank Overdraft: For smaller, shorter-term needs
  • Simultaneous Settlement: Coordinate sale and purchase on same day
  • Extended Settlement: Negotiate longer settlement on purchase

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