Buy before you sell: bridging finance for business premises

The right premises rarely come up at a convenient time. The warehouse next to your biggest customer, the clinic with parking, the shopfront on the corner you’ve watched for years: when it lists, you either move or watch someone else buy it. The problem is that most of your borrowing power is sitting in the premises you already own, and they haven’t sold.

Buying before you sell is the textbook bridging case. There are two events. Event A is the settlement of the property you’re buying. Event B is the settlement of the property you’re selling. For a period, you own both. A bridging loan carries you across that span.

How does buying before selling actually work?

In most structures, both properties are offered as security. The lender looks at them together, as one package, and funds the new purchase against the combined equity. When your old premises sell, the net proceeds go straight to paying down the bridge. What’s left owing sits on the new property and becomes your ongoing debt.

It helps to think in three numbers:

1. Peak debt. Everything you owe while you hold both properties: your current loan, plus the purchase price and purchase costs (stamp duty, legals, any adjustments), less the cash you put in, plus any finance costs added to the loan.
2. Net sale proceeds. The expected sale price of your current premises, less agent’s commission, legals and adjustments.
3. End debt. Peak debt minus net sale proceeds. This is the long-term loan you’ll carry on the new premises.

The bridging timeline and peak-debt calculator works all three out from your figures and draws the timeline for you.

What will a lender look at first?

A bridging lender reads the plan from the far end. They want to know that the sale will happen, roughly when, and for roughly how much. In practice that comes down to:

• Evidence of value for the property you’re selling: an agent’s appraisal at minimum, and often a formal valuation.
• Status of the sale: not yet listed, listed, under offer, exchanged or unconditional. Each step makes the exit firmer.
• Peak debt against combined value, which works like a loan-to-value ratio across both properties. The more headroom, the more room there is for a lower price or a slower sale.
• End debt you can carry. Once the bridge is repaid, can the business service what’s left on the new premises?

You’ll notice what isn’t at the top of that list: a perfect credit history. Past credit issues are considered case by case. The security and the exit do most of the talking.

An illustrative example

A family-owned joinery business owns its workshop outright in a suburb that has gone residential around it. A larger industrial unit comes up for $1.6m, with about $95k of stamp duty and legal costs. They expect the old workshop to sell for around $1.1m, with $35k of selling costs, and they’ll put in $120k of cash.

Line	Amount
Existing debt	$0
Purchase plus costs	$1,695,000
Less cash contributed	−$120,000
Peak debt	$1,575,000
Net sale proceeds	$1,065,000
End debt on the new unit	$510,000

Against combined security of $2.7m, peak debt is about 58% of value. The end debt of $510k sits against a $1.6m property. On paper this is a comfortable bridge. The real work is confirming the $1.1m sale price and deciding how long to allow for the sale. (Illustrative figures only.)

How long should the bridge run?

As long as the sale might realistically take, plus a buffer. A commercial sale can involve a marketing campaign, negotiation, due diligence by the buyer and a settlement period set in the contract. Any of those can stretch. Our guide to bridging loan terms walks through how to size the buffer, and our page on exiting by sale covers what makes a sale exit convincing.

A short test before you commit: write down the date you hope the sale settles, the date you expect it to settle, and the date it could settle if the first buyer falls over. Ask for a term that covers the third one.

If you want a second opinion on your dates and numbers at this point, you can run your buy-before-you-sell plan past a specialist in about a minute.

What about stamp duty and GST?

Buying a commercial property triggers transfer (stamp) duty in the state where it sits, and the timing of that payment is part of your Event A costs. Check the rules with your state revenue office, for example Revenue NSW, and build the amount into the purchase costs in the calculator.

On the sale side, commercial property sales are generally subject to GST unless an exemption such as a going concern applies, and a capital gain may arise. The ATO’s guidance on selling commercial premises explains how GST, the margin scheme and the small business CGT concessions can apply. Your accountant should confirm your net proceeds, because tax can change what’s actually available to repay the bridge.

Buy first or sell first?

Selling first means no bridge, but it can leave you without premises or renting in between, and you may miss the property you want. Buying first secures the property but means carrying two properties for a while. Neither is right for everyone. Our guide on whether to sell first or buy first sets out the trade-offs, and if the problem is just the deposit on exchange, a deposit bridge may be all you need.

Could you buy first? Let’s find out.

If the new premises are the right move, the finance shouldn’t be the reason you miss them. Tell us about both properties, your cash contribution and where the sale is up to. It takes about 60 seconds, there’s no credit check when you first enquire, and your details go to one team rather than being passed down a line of lenders. A bridging specialist will call you to talk through peak debt, end debt and timing.

Please answer the form accurately, particularly the property values and existing loans. That’s what lets us suggest the right structure on the first call.

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