Exit Strategy
Exit Strategy is the borrower's documented plan for repaying a loan — whether by refinancing to a longer-term lender, selling an asset, completing a sell-down, or drawing on another confirmed funding source. In private lending and development finance, exit strategy is typically the primary approval criterion.
Why It Matters
Private and specialist lenders don't assess deals the same way banks do. Rather than focusing primarily on income and serviceability, they focus on how the loan will be repaid. A clear, credible exit strategy — such as a confirmed refinance pre-approval, an unconditional sale contract, or a realistic sell-down timeline — is what makes the deal viable.
How It Works
- The borrower presents a defined repayment pathway — refinance, sale, or incoming funds.
- The lender assesses whether the exit is realistic, documented, and achievable within the loan term.
- Common exit types include: refinance to a bank, property sale, project sell-down, and retain and refinance.
- Weak or unclear exits are the most common reason private lending applications are declined.
Common Use Cases
- Bridging loans with a confirmed sale or refinance date
- Townhouse development exit via staged sell-down or retention
- Second mortgage business loans with planned bank refinance
- ATO debt payouts funded by upcoming asset sale proceeds
- Mid-build refinance from private to bank construction finance
Related Switchboard Resources
- Private Lending
- Townhouse Development Finance
- Commercial Bridging Finance
- Sell-Down
- Retain and Refinance
- Refinancing
What makes a strong exit strategy?
A strong exit has documented evidence — such as a refinance pre-approval letter, unconditional sale contract, or a realistic sell-down timeline supported by comparable sales data. The more concrete the evidence, the stronger the application.
Can I have more than one exit strategy?
Yes — lenders often prefer to see a primary exit and a fallback. For example, the primary exit might be a sell-down, with the secondary exit being a retain-and-refinance if market conditions slow.
Why do private lenders care more about exit than income?
Because private loans are short-term facilities. The lender needs confidence the loan will be repaid within 6–24 months, so the exit pathway matters more than the borrower's monthly cash flow.