Exit by refinance: moving from a bridge to long-term finance

Sometimes the bridge isn’t bridging to a sale or a payment. It’s bridging to better finance. The business needs money now, and a bank or long-term lender will be the right home for that debt, just not yet. Maybe the bank needs another set of financials, or a valuation, or for a tax debt to be cleared first. The bridge buys time; the refinance ends it.

This page is about that exit: refinancing a bridging loan into long-term finance.

How is a refinance exit different from a sale exit?

With a sale, the exit depends on a buyer. With a refinance, it depends on a lender’s credit decision, made in the future, about your business as it looks then. That makes it a different kind of uncertainty.

A new lender will look at:

• Serviceability. Can the business meet the new loan’s repayments from its income, under that lender’s assessment?
• Security. The value of the property, often by a fresh valuation.
• Financials. Up-to-date tax returns, financial statements and BAS lodgements.
• Credit history. Including how the bridge itself was managed.
• Purpose. What the new loan is for, and whether it fits their policies.

The bridge lender will be asking, in effect, “Will this business pass that test when the time comes?”

How strong is your refinance exit right now?

Where you are	Strength
Haven’t spoken to a long-term lender	A plan; plan B needed
Spoken to one; know what they need	Fair
Application lodged	Moderate
Conditional approval	Good
Formal approval, documents issued	Strong

If you’re at the top of that table, don’t be discouraged. It’s common, and it’s fixable. It simply means the bridge term should allow time to work through the refinance properly, and the plan should include a fallback.

What usually trips up a refinance?

1. Serviceability shortfalls. The business income doesn’t support the new loan at the lender’s assessment.
2. Valuation below expectation. The property supports a smaller new loan than planned.
3. Overdue lodgements. Tax returns or BAS not up to date. Lenders often won’t proceed until they are.
4. Tax debts. An ATO debt can block a refinance. Note that the ATO generally offsets refunds against tax debts, which can affect cash you’re counting on.
5. Guarantee requirements. Business Victoria notes that banks usually want a personal guarantee for premises loans, which can put assets such as the family home on the line. Know that before you plan around a bank refinance.

Want to know how your refinance plan looks from the bridging side? Ask a specialist to review it after a short enquiry.

How do you prepare a refinance exit from day one?

• Talk to the likely long-term lender early, before the bridge settles if possible.
• Get lodgements up to date: tax returns, BAS, financial statements.
• Use the bridge to fix blockers, such as arrears or a tax debt, if that’s what stands between you and the refinance. That’s the scenario on our refinance gap page.
• Check end debt against serviceability. The peak debt and end debt page explains how.
• Keep the bridge clean. Meet any payments on time; how you handle the bridge becomes part of your credit story.
• Agree plan B: another lender, a partial sale, or a term extension if the refinance needs longer.

An illustrative example

A medical practice buys the building it leases, using a bridge because its bank won’t finalise a commercial loan until the practice’s latest financial statements are prepared, three months away. The bank has indicated it will lend up to a certain amount once those statements are in and a valuation is done.

The practice owners use a six-month bridge. In month one they get their accountant working on the statements. In month three they lodge the refinance application. In month four the bank issues conditional approval; in month five the refinance settles and repays the bridge. The extra month of term was never used, but it was there if the valuation had been queried. (Illustrative scenario.)

What if the refinance is smaller than the bridge?

Then part of the bridge needs another exit. Options include putting in cash, selling an asset or refinancing the shortfall elsewhere. The bridging calculator has a refinance mode that shows any gap between the refinance amount and the bridge. The exit evidence checklist lists what to gather for a refinance exit.

Which long-term lenders could be the exit?

A refinance exit doesn’t have to mean a major bank. Depending on the business and the property, the long-term home for the debt might be a bank, a second-tier lender, or a longer-term private facility. What matters for the bridge is that someone realistic will lend the end debt on terms the business can sustain.

When you’re weighing up potential refinance lenders, consider:

• Their appetite for your industry and property type.
• What they’ll need, and how long it takes to prepare.
• Guarantee and security requirements.
• Their track record of settling on time.

Having a second refinance option in mind is a simple, effective plan B.

Build the bridge with the refinance already in mind

A refinance exit works best when it’s planned before the bridge begins. Tell us what you need now, who you expect to refinance with and what they’ve said so far. It takes 60 seconds, there’s no credit check when you first enquire, and your details stay with us instead of being sent to a line of other lenders. A real person calls you to map both ends.

Please be accurate about income, existing debts and tax lodgements. Those are exactly what the refinance lender will check later.

Plan your bridge-to-refinance →