Exit strategies lenders accept on short-term facilities
A short-term lender is not underwriting your project. They are underwriting the event that repays them. On a twelve-month facility the credit question is not “is this a good development” — it is “what specifically hands me my money back, when, and what happens if that thing does not occur.”
Most declined bridging applications are not declined on the asset. They are declined on the exit.
The strongest exit: an unconditional contract of sale
An unconditional, arm’s-length contract awaiting settlement is the easiest exit to sell to a caveat or second-mortgage lender. It removes almost every exit-risk objection they would otherwise raise, because the repayment event has already happened commercially — only settlement remains.
Lead with it. If you have a signed contract, it belongs in the first paragraph of the submission, not on page four.
This matters even where the sale is not the exit. In buy-before-sell bridging, lenders shade an unsold property’s value until a contract is signed. On one file that shading required the borrower to fund a shortfall of roughly $62,250 up front, including about $16,500 of agent commission — or $45,750 if commission funds were held separately. Once a contract was signed, the lender stopped shading, lent against the full expected price, and the additional cash contribution disappeared entirely.
Getting a contract signed is often worth more than negotiating the rate.
Document multiple independent exits, not one
A single repayment source is a single point of failure, and credit teams price it that way. Present two or three independently evidenced paths.
A worked structure from an equity-release facility funding a separate project: sale proceeds from one joint-venture dwelling with the guarantor’s interest secured by caveat; a pending development-loan drawdown on a second site; and releasable equity against named unencumbered properties. Three sources, each separately evidenced, none dependent on the same event.
The same logic applies to portfolios. On a cross-secured facility over four properties, each property carried its own verifiable exit — one via compulsory acquisition (with the future value discounted over two years), the others via existing or pending conversion to development facilities. It is the per-asset exit detail that makes a large cross-secured facility fundable, not a single blended narrative.
Be explicit about staged financing
On an early-stage development site, the honest answer is that the bridge is repaid by the next facility, not by a sale. Say so, and say how.
The standard framing: land or bridging debt now, refinanced into the land-debt component of a construction facility once the project reaches construction-ready stage and a gross realisation value can be relied on. Lenders and investors will specifically ask how their exposure gets taken out — answering it before they ask changes the tone of the whole assessment.
Where a single-step refinance is not achievable, structure a layered exit and show it. Two patterns that work:
- Maximise a second-tier lender’s first mortgage on a fresh panel valuation, then backfill with a private second behind it to fully discharge the existing private lender.
- Negotiate a temporary standstill — ask the existing private lender to remain as second mortgagee for a short bridging period while a sale or refinance completes, being repaid mostly from the incoming second mortgagee.
Evidence that strengthens an exit
Show purchasers are in the money. Where a project is fully pre-sold but stalled on an unrelated liability blocking title issuance, resale evidence showing units reselling above their original contract price demonstrates that purchasers remain motivated to settle. That supports a small, prioritised facility repaid straight from the first few settlements.
Normalise historical cash flow and pair it with a paydown table. Where the financier needs comfort on refinance-to-mainstream timing, strip out one-off and non-recurring costs that depress the run rate, model an explicit monthly interest-servicing allocation, and show the paydown path to the target refinance date.
Progressive settlements count as a partial exit. On a subdivided development under a single mortgage, selling and settling individual units progressively is a workable structure — but build in time for the mortgagee’s formal consent to the plan of subdivision, which conveyancers require before each unit can settle.
What weakens an exit
- “We will refinance” with no named lender, no LVR and no valuation basis. That is a hope, not an exit.
- An exit that depends on an approval you do not have. If the primary exit is a construction-loan refinance that could be delayed by a permit issue, name a specific realisation plan for the fallback. Credit will ask.
- A blended portfolio exit. Break it down per asset.
- An exit beyond the facility term. If the refinance realistically lands in month fourteen, do not take a twelve-month facility and plan to negotiate later.
Manage the exit before it becomes urgent
Ask for an extension early, and pair the request with concrete evidence of progress — a permit just received, a contract just signed — plus a remaining-steps timeline and a realistic target exit value. Do not wait to be chased.
The cost of leaving it late is specific. Missing a maturity date can trigger an automatic default fee of the current rate plus around 5% p.a. An expired facility that has already used multiple extensions can revert automatically to a penalty rate in the region of 15% p.a. while a refinance is chased. Each extension used also reduces goodwill for the next one.
Two practical notes. Where a lender needs its own investors’ written consent before it will even instruct its solicitor to prepare extension documents, that consent step is lead time you have to plan for. And where a capitalised-interest facility holds a fixed dollar interest reserve rather than an open-ended one, interest accruing beyond that reserve becomes an immediate out-of-pocket obligation — and non-payment is a default event, not an overdraft.
The test
Write your exit as a single sentence naming the event, the date, the counterparty and the evidence. If you cannot, you do not yet have an exit — and neither does the lender.
General information only. It is not credit assistance, financial product advice, or an offer of finance, and it does not take account of your objectives, financial situation or needs. Terms and figures described are indicative observations over 2024–2026.