What Are The Most Typical Exit Strategies For Bridging Loans?

A viable exit strategy is one of the primary determining factors where bridging loan eligibility is concerned. For an applicant to be considered eligible for bridging finance, they must be able to demonstrate when and how they intend to repay the funds borrowed.

Bridging finance rarely incorporates monthly repayments, instead of being repaid in full as a single lump-sum payment on a pre-determined date. As a result, lenders must be confident that the applicant has a viable strategy in place to ensure they are able to repay their loan as agreed.

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Exit Strategy Examples

The strength of your case (i.e. the viability of your exit strategy) will ultimately determine how much you can borrow, and which lenders are willing to work with you. Precisely where independent broker support can help, as the importance of presenting a strong and compelling case cannot be overstated.

As for what is considered a viable exit strategy, there are several common approaches to bridging finance repayment lenders are willing to accept. Typical examples of which being as follows:

1. Cash Redemption

This is where the borrower intends to repay the loan with cash from a different source, which could be an investment maturity or a pension lump sum.  A lender may be willing to provide what is technically an ‘advance’ on funds the applicant will subsequently gain access to, upon the provision of sufficient evidence.

2. Resale Strategies

Residential and commercial property buyers can often find their plans brought to a halt by a broken chain. They set their sights on their dream property at an affordable price, but the sale on their existing property has not yet closed. In which case, bridging finance could be used to complete the purchase of their new property until the sale of their previous property is complete. At which point, the loan can be repaid in full.

3. Fix And Flip

A potentially profitable venture, which involves purchasing a ‘fixer upper’ property, conducting the necessary renovations and selling it on for a much higher price. The intention to improve and subsequently sell a property you intend to purchase within a short period of time is a viable exit strategy, on the condition that the property is guaranteed to sell and for an appropriate price when the time comes.

4. Business Performance Strategies

It could be that you simply need a quick cash injection to enable your business to expand, diversify or perform on an entirely higher level. Or perhaps, to cover the costs of a major order for which additional equipment and manpower are required. If the result of the proposed investment (funded by bridging finance) is guaranteed to be positive and profitable, it will likely be considered an acceptable exit strategy.

Ask the Experts…

As all bridging finance applications are considered by way of individual merit, it is essential to seek expert broker support before applying. The strength of your case will ultimately determine whether you qualify and how much you can borrow, along with the competitiveness of your loan if you choose to go ahead.

For more information on any of the above or to discuss your requirements in more detail, contact a member of the team at UK Bridging Loans today.

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