Exit Strategy

An exit strategy is the plan for repaying a bridging loan or development finance facility at the end of the term. Lenders require a credible, evidenced exit strategy before they will approve short-term finance, because these facilities are not designed for long-term use.

Common exit strategies include: sale of the security property (most common for residential bridging), refinance to a commercial mortgage or buy-to-let mortgage, business sale, completion of a longer-term business loan application, or maturity of an investment. The stronger and more certain the exit, the better the terms available.

A closed exit (where contracts have exchanged or a mortgage offer is confirmed) attracts lower rates than an open exit (where the plan is credible but not yet contractually committed). Lenders assess exit strategies carefully - a weak or implausible exit is one of the most common reasons for bridging loan declines.

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